Pound Slumps as BoE Stays Put Amid Rising Inflation

The UK's inflation rate rose to 3.1% in August, its highest level since March, while core and services inflation remained steady at 2.6% and 3.4%, respectively.

This development is causing tension between the Bank of England (BoE) and other major central banks, such as the Federal Reserve and European Central Bank, which are taking a more hawkish stance on interest rates.

The BoE is expected to maintain its current policy rate, leaving a gap with its peers that is weighing on the pound's value.

Fiona Cincotta, a Senior Market Analyst at StoneX, notes that this divergence in policy is now driving sterling's performance rather than domestic interest rates.