UK inflation up on the agenda in the session ahead | investingLive

The UK CPI report today is the one for September, with estimates seeing headline annual inflation creeping up to 4.0% (vs 3.8% in August) and core annual inflation up to 3.7% (vs 3.6% in August). If within expectations, that might seem like a case of more stubborn inflation in the UK. As such, it shouldn’t impact the BOE outlook at least for November by much.

As things stand, traders are pricing in ~85% odds of no rate change next month with just 11 bps of rate cuts priced by year-end.

Circling back to the inflation report for September, the devil will once again be in the details though.

While headline annual inflation might jump back up to 4%, analysts are expecting this to be largely attributed to base effects. In particular, driven by prices for airfares – which fell sharply in September last year and isn’t expected to drop as much this year. A much lower drop in petrol/energy prices this year are also part of that equation.

So even with a nudge back up to 4%, many are expecting this to be the peak in terms of the headline number we’ll be seeing.

As for core annual inflation, it is expected to be driven up amid a slight rise in both the goods and services components. The latter is the one to watch as it remains a sticking point for the BOE, still hovering closer to 5% for now. Similarly, food price inflation also continues to keep near 5% but continues to show signs of stabilisation and slowing. So, that will provide some comfort at least that price pressures are not exactly accelerating strongly going into Q4.