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* Graphic: sterling and gilt yields bit.ly/2dgAXn1
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By Jemima Kelly
LONDON, Dec 14 (Reuters) - Sterling steadied on Wednesday after data showed the number of people in work in Britain falling but wages growing, as investors focused on a Federal Reserve meeting later in the day that is set to produce the first interest rate rise in a year.
The Office for National Statistics numbers suggested a slowing in the labour market after the Brexit vote, with the number of people in work falling by 6,000 in the three months to October - the first decline since the second quarter of last year.
Though Britain's unemployment rate stayed at 4.8 percent, in line with forecasts, that is widely expected to rise next year as companies hold off from hiring as they wait for more clarity on the country's future ties to the EU, which could take years to be negotiated.
Total earnings including bonuses rose by an annual 2.5 percent, compared with 2.4 percent in the three months to September. Excluding bonuses, earnings rose by the most since the three months to August 2015.
Sterling initially inched higher after the data but then eased back to trade flat on the day at $1.2657 by 1000 GMT. Against the euro, it was flat at 83.95 pence.
"I take (today's data) as another reason to think that the UK economy is going to run out of steam over the course of 2017, so my bias is to go short cable (sterling/dollar)," said Societe Generale macro strategist Kit Juckes. "I'm not going to get super-excited about data showing ex-bonus wage growth."
"I still like being short of the pound here. I still think the balance of risks is that we get negative news as 2017 progresses."
The Fed is seen as all but certain to raise its main rate by a quarter point to 0.50-0.75 percent, in an announcement due at 1900 GMT. But it will be Chair Janet Yellen's tone, and new forecasts for future rates, that will drive the market response.
In contrast, the Bank of England is expected to keep rates at record lows at a policy meeting concluding on Thursday. Market pricing shows investors expect rates to stay unchanged until the end of 2018 because of uncertainty over the Brexit process, despite higher inflation fed by sterling's 10 percent trade-weighted fall since the EU referendum in June.
Data on Tuesday showed consumer prices rose 1.2 percent last month, beating economists' expectation for a 1.1 percent annual rise in a Reuters poll.
"The pronounced fears amongst market participants over pound-induced inflation in the immediate aftermath of Brexit have receded notably," said MUFG's European head of G10 currency strategy, Derek Halpenny.
"The inflation data yesterday told two stories, but the key one for us reinforces the easing of concerns over a damaging inflation-induced hit to the economy in 2017." (Editing by Alison Williams)