Investing.com – The pound fell to session lows against the dollar on Wednesday after the Bank of England cut forecasts for growth and inflation in its quarterly inflation report, and indicated that rates could remain on hold until late next year.
GBP/USD hit lows of 1.5850 and was last down 0.42% to 1.5851.
The drop in the pound came after the BoE said inflation is likely remain below its 2% target in the near term and fall below 1% at some point during the next six months. The bank said it now expects inflation to take three years to return to its 2% target.
The bank said the outlook for inflation had weakened due to steep declines in commodity prices and the sluggish outlook for global growth.
The annual rate of U.K. inflation fell to a five-year low of 1.2% in September.
“When Bank Rate does begin to rise, the pace of rate increases is expected to be gradual, with rates probably remaining below average historical levels for some time,” the BoE said.
The bank said it continued to expect economic growth of 3.5% this year but pared its forecast for growth in 2015 to 2.9% from 3.1% in August.
Earlier Wednesday, the latest U.K. employment report showed that average earnings rose in the three months to September.
The Office of National Statistics reported that total earnings, including bonuses, rose 1.0%, up from a 0.7% increase in the three months to August.
Average weekly earnings, excluding bonuses, rose by 1.3% in the three months to September, after a 0.9% increase in the three months to August.
It was the first time since the onset of the 2008 financial crisis that average weekly earnings, excluding bonuses, outstripped inflation.
The number of people claiming unemployment benefits fell by 20,400 in October the ONS said, below expectations for a decline of 24,900.
The U.K. unemployment rate was unchanged at 6.0% in the three months to September, compared to forecast for a downtick to 5.9%.
Elsewhere, sterling fell to session lows against the euro, with EUR/GBP rising 0.41% to 0.7866.