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The UK's Office for National Statistics is scheduled to release the Consumer Price Index (CPI) data for September on Wednesday. The data, which is expected to show a decrease in headline and core annual inflation but remain above 6%, could potentially influence the Bank of England’s (BoE) policy direction and the volatility of Pound Sterling.
In anticipation of this, the Pound Sterling has been consolidating its recent recovery near 1.22 against the US Dollar (GBP/USD). If the headline and core inflation data surpass expectations, it could revive bets of another BoE rate hike in December and potentially boost the Pound Sterling.
The headline annual UK CPI is anticipated to rise by 6.5% in September, down from August’s 6.7%. Core CPI is predicted to rise 6.0% YoY in September, slowing from August’s 6.2%.
The UK economy's wage inflation data showed Average Earnings excluding bonuses rose 7.8% 3M YoY in August, aligning with market forecasts and slowing from a revised 7.9% increase in the three months to July. BoE Chief Economist Huw Pill referred to these data as an outlier amidst high wage inflation.
BoE Governor Andrew Bailey acknowledged progress on inflation during the Institute of International Finance Annual Membership Meeting earlier this week. However, he emphasized that more work needs to be done and expressed confusion over the continuous strength of pay growth in the UK.
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