The unemployment rate in the U.K. declined to 7.7 percent in the period from May to July, from 7.8 percent in the February-to-April period, the Office for National Statistics reported on Wednesday. 

Economists had expected the rate, which measures the percentage of the total workforce that is unemployed and actively seeking employment during the previous three months, to remain steady at 7.8 percent. The U.K. unemployment rate is closely watched by investors, as Bank of England Governor Mark Carney has said that the bank could raise interest rates if the unemployment rate drops below 7 percent.

“The improvement also increases the possibility that unemployment could fall faster than the Bank of England expects, meaning an earlier hike in interest rates than 2016, as currently envisaged under the Bank’s ‘forward guidance,'” Chris Williamson, an economist at Markit, wrote in a research note. 

The number of people employed in the 16-64 age group rose by 80,000 or by 0.2 percentage points to 29.84 million, or 71.6 percent, in the May to July period.

Meanwhile, the Claimant Count Change, which measures the change in the number of unemployed people in the U.K. during the reported month, declined by 32,600 in August, compared to a decline of 36,300 in the previous month, but better than analysts’ expectations of a decline of 22,000.

The Average Earnings Index, which measures the change in the price businesses and the government pay for labor, including bonuses, rose by 1.1 percent in the three-month period ending in July, from a 2.2 percent increase recorded in the previous three-month period and slightly below expectations of a 1.2 percent rise.

"The labor market looks set to improve further as we move toward the end of the year, perhaps at a pace that might continue to surprise policymakers. In particular, surveys of recruitment agencies indicate that demand for staff appears to be surging as the economy gains faster-than-expected momentum,” Williamson said.

London’s FTSE 100 was trading down 0.10 percent following the data release.