LONDON, July 5 Reuters Sterling edged lower on Wednesday as traders considered whether the British currency will be hurt by several expected interest rate increases by the Bank of England BoE that could put more strain on the economy.

The pound edged 0.02 lower against the dollar at 1.2713 by 0840 GMT, 1.2 below the 14month high it touched against the dollar last month.

Against the euro, the pound was 0.14 lower at 85.60 pence, taking some distance from a 10month high reached against the single currency last month.

The BoE raised interest rates by half a point in June to 5, and markets expect it to deliver an identical increase when it meets on Aug. 3.

Sterling is again decoupling from UK rate prospects, suggesting markets are questioning the credibility of UK policy, said Adam Cole, chief currency strategist at RBC Europe.

Although we have serious mediumterm concerns on imbalances and policy credibility in the UK, this is a difficult theme to trade tactically, particularly in thin summer markets, and we will stay neutral on GBP in the shortterm, he added.

Money markets are pricing in that BoE rates will not peak until March 2024, reaching 6.28.

A month ago, the expectation was for a maximum of about 5.3 by the end of this year, with the first cut a few months later.

The BoE is watching economic indicators closely as it considers how many more rate hikes are needed to control inflation.

Growth in Britain39;s private sector slowed sharply last month, despite…