UK Wage Growth Strengthens Inflation Outlook, Delays BoE Policy Easing; GBP/USD Rises
September 16, 2025 — By Bob Mason
UK labor market data shows strong wage gains. The data makes inflation worries grow and slows any change in BoE rates. At the same time, traders drive the British pound higher against the US dollar.
Rising Wages and Steady Unemployment Signal Inflation Risks
The Office for National Statistics shows that wages grew by 4.7% over the three months ending in July. The rate edged up from 4.6% in June. These numbers add to a strong labor market. They may lead to more spending, which can push prices up.
Unemployment stayed at 4.7% in July. The result helps explain the overall health of the labor market. However, fewer people worked on a payrolled basis. In July, the count dropped by 6,000. Compared to July 2024, the loss was 142,000. Early numbers for August show a fall of 8,000 payrolled workers.
The report shows that job vacancies have fallen month after month for 38 months in a row. Between June and August 2025, vacancies dropped by 10,000. Fewer claimants made requests in July. Yet, the total claim numbers stay lower than last year. They stand at 1.686 million.
Implications for Bank of England Policy
This data puts the Bank of England in a hard spot. Wage gains and steady jobs keep consumer faith high. High spending can push demand and prices up.
Inflation numbers from earlier this month add to this view. In July, the annual headline rate climbed from 3.6% to 3.8%. Core inflation also stood at 3.8%. Both rates sit above the Bank’s 2% target. Markets now see less chance for a rate cut soon.
Economists at ING note that August inflation data may show a small drop in basic price moves. Yet, strong labor figures point to a steady policy stance. The next BoE meeting comes on Thursday, September 18. —
Currency Market Reaction: GBP/USD Rises on Hawkish Sentiment
The strong labor data gave the British pound a lift. The GBP/USD rate rose from a low near $1.35920 to a high at $1.36275. It then fell a bit. In the morning session on September 16, GBP/USD stayed near $1.36249. This gain of 0.19% marks the day.
Investors now expect that the Bank of England will hold its current stance. The steady wage growth and weighty inflation data push them toward a firm tone at the BoE.
Looking Ahead: Inflation Data and Economic Indicators in Focus
Market watchers will soon see the UK inflation report due on September 17. Analysts expect headline inflation to remain near 3.8% while core inflation may slip to 3.6%. If inflation falls more than most expect, some may hope for a rate cut in November. Such a change could put pressure on the pound.
UK retail sales data on September 19 will also show more about how consumers spend in this price environment.
Summary
• UK wages grew 4.7% in the three months ending in July, up from 4.6% in June.
• Unemployment held at 4.7%.
• The number of payrolled employees fell month over month, and job vacancies have dropped for 38 consecutive months.
• Inflation remains above the Bank of England’s target, both in headline and core measures.
• Fewer market views see a near-term policy change at the BoE because of strong labor data.
• GBP/USD rose to about $1.3625 on a firm market tone.
• Upcoming inflation and retail sales data may shift views on future policy.
Policymakers and investors now await new inflation numbers and other signs of economic direction. They watch all moves closely as the Bank of England plans its next rate decision.
Bob Mason is a financial journalist with over 28 years of experience. He covers global markets, including currencies, commodities, and equities, with a focus on European and Asian economies.
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