Finance
Sterling Steady After UK Inflation Data and Ahead of Fed
Published by Global Banking & Finance Review®
Posted on September 17, 2025
2 min readLast updated: January 21, 2026
Add as preferred source on GoogleQuick Summary
Sterling remains stable as UK inflation data aligns with expectations. BoE likely to keep rates unchanged, while Fed is expected to cut rates.
Pound Remains Stable Following UK Inflation Data and Fed Outlook
UK Inflation and Interest Rate Outlook
By Canan Sevgili
LONDON (Reuters) -Sterling held steady against the dollar as UK inflation data reinforced expectations that the Bank of England will keep rates unchanged this week, in contrast to the U.S. Federal Reserve, which is expected to cut rates later on Wednesday.
The pound was little changed at around $1.3638, having hit its highest level since early July on Tuesday against a broadly weaker dollar.
Impact on Bank of England's Decisions
The BoE is widely anticipated to keep interest rates at 4% when it meets on Thursday. Official figures on Wednesday showed inflation at an annual 3.8% in August, in line with a Reuters poll, reinforcing market expectations that further rate cuts are unlikely soon.
"In line inflation print is unlikely to move the needle on the BoE's interest rates decision tomorrow," said Emma Mogford, fund manager at Premier Miton Monthly Income Fund.
"Consumers and businesses will have to wait a bit longer for an interest rate cut."
Market Reactions to Inflation Data
Economists polled by Reuters expect one more rate cut by the end of the year.
High inflation remains a challenge for Britain's government as well as the BoE. Finance minister Rachel Reeves said last week that fellow ministers should focus on helping the central bank to slow price growth, as well as boosting economic growth.
Sterling edged up against the euro, which slipped 0.07% to 86.89 pence.
"The good news is that August inflation data has corrected some of the upside surprise seen last month, but the bad news is that CPI may have a little further to go before hitting its peak," said Deutsche Bank chief UK economist Sanjay Raja.
Focus meanwhile turned to the U.S. Federal Reserve, which is expected to lower its benchmark interest rate by 25 basis points to a 4.00%-4.25% range later on Wednesday.
The European Central Bank kept rates unchanged last week, highlighting that big central banks are moving in different directions.
(Reporting by Canan Sevgili; Editing by Dhara Ranasinghe and Sharon Singleton)
Key Takeaways
- •Sterling remains stable after UK inflation data release.
- •BoE expected to maintain interest rates at 4%.
- •UK inflation at 3.8% aligns with market expectations.
- •Fed anticipated to cut rates by 25 basis points.
- •ECB keeps rates unchanged, diverging from other banks.
Frequently Asked Questions about Sterling steady after UK inflation data and ahead of Fed
1What is inflation?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
2What is the Bank of England?
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, maintaining monetary stability, and overseeing the financial system.
3What are interest rates?
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are set by central banks and influence economic activity.
4What is currency exchange?
Currency exchange is the process of converting one currency into another, typically for international trade or travel. Exchange rates fluctuate based on market conditions.
5What is the Federal Reserve?
The Federal Reserve, often referred to as the Fed, is the central bank of the United States, responsible for setting monetary policy and regulating the banking system.
