By Joice Alves
LONDON (Reuters) -Sterling rose on Tuesday after data showed British basic wages grew at a record pace in the second quarter, adding to the Bank of England’s worries about inflation.
The pound was last 0.2% higher at $1.2711, after rising as much as 0.28% to $1.2720 following the data.
It was flat against the euro at 85.95 pence after briefly rising against the single currency to 86.00 pence.
Wages excluding bonuses were 7.8% higher than a year earlier in the three months to June, representing the highest annual growth rate since comparable records began in 2001, the Office for National Statistics said.
Economists polled by Reuters had forecast a 7.4% rise.
Wage growth is “still clearly running much too fast for the BoE’s liking and will help cement a September hike. The flip side is that unemployment is clearly rising now,” said ING UK economist James Smith.
Official data showed some fresh signs of cooling in the jobs market with the unemployment rate unexpectedly rising to 4.2% from 4.0%, the highest since the three months to October 2021.
Markets are now pricing in a 99% chance of a 25 basis point (bps) rate hike from the BoE in September, with a roughly 55% chance of the benchmark rates hitting 6% in early 2024, up from their current level of 5.25%. On Monday, the chance of rates going that high stood at about one in three.
BoE Governor Andrew Bailey said earlier this month that the rate of pay growth was “materially above” the central bank’s forecasts but the BoE also signalled it was getting close to pausing its run of interest rate increases.
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