UK Inflation Concerns Keep Pound Above $1.32 Despite Construction Slowdown

The British pound held steady above $1.32 as concerns over rising energy costs and persistent inflation in the UK kept expectations alive for higher interest rates. Bank of England policymaker Catherine Mann warned that inflation, already above the central bank’s 2% target, has become embedded in the economy. She projected inflation could hit 4% by the end of the year, coinciding with wage negotiations that could further drive up prices. Mann has been a vocal advocate for raising interest rates to 4% since July, though she remains in the minority on the Monetary Policy Committee.

Meanwhile, weaker-than-anticipated US inflation and jobs data last week increased the likelihood that the Federal Reserve will hold interest rates steady in October, with a potential move in December now more probable. In the UK, construction activity continued to shrink in September, though the contraction was less severe than forecasted. Builders grew increasingly cautious due to high interest rates, inflation, weak demand, and uncertainty linked to the Middle East.