The British pound slipped toward $1.35, its weakest level since August 19, as hawkish comments from Federal Reserve officials boosted the US dollar. At the same time, a decline in Brent crude prices helped ease concerns over UK inflation and shifted expectations for the Bank of England’s next rate increase to 2027, from late 2026 previously.
In his first major speech since becoming chair in May, Warsh warned that inflation has not slowed meaningfully and stressed that policymakers need clearer evidence that underlying price pressures are easing; otherwise, the Fed still has “work to do.”
According to LSEG data, markets are currently pricing in around 24 basis points of additional BoE tightening by December and about 36 basis points by February 2027.
UK inflation rose to 2.9% in July, driven mainly by higher household energy bills, and is expected to climb further toward the end of the year. However, the labor market remains subdued, which could make the BoE more cautious about tightening policy in the near term.