UK jobs data gives BoE 'little reason' to raise rates – Sterling could remain under pressure

Today's jobs figures give Bank of England officials little reason to think about raising rates any time soon. Job vacancies are falling, earnings growth is cooling, payroll numbers continue to shrink, and unemployment remains stubbornly stuck at around 5%.

In short, the labour market shows clear signs of slack rather than tightening, which should keep a lid on wage pressures. Inflation, meanwhile, remains on a broadly disinflationary path, with still no meaningful evidence of second-round effects filtering through into wages or prices.

Put it all together, and we don't see the conditions in place for the MPC to consider tightening policy this year. The one wildcard remains the war in Iran - but with oil prices already reflecting a degree of optimism, we don't think this poses a serious enough upside risk to change that picture.

We expect the MPC to hold rates steady for the rest of the year, before they are cut at some point in 2027. This could act to keep a lid on sterling, particularly against the euro, with the ECB appearing almost certain to hike as soon as next month.