3.5%—the UK’s September CPI figure has just come in, up from 3.1% in August.
It was expected to be 3.4%, while the Bank of England itself forecast just 3.0% back in July. Both got it wrong.
Core CPI came in at 2.8%, up from 2.6% in August. Services inflation rose to 3.7%, from 3.4% the previous month. Petrol hit 169.5 pence a litre, up 8.2 pence in a month—the highest since August 2022.
Put simply, this isn’t just about oil prices.
The UK relies on imported natural gas. When war breaks out in the Gulf, gas prices rise first, followed by electricity and fuel costs. Then the pressure seeps into wages and service prices. Once it shows up in core and services inflation, the Bank of England can’t pretend not to see it, because it’s no longer an external shock—it’s inflation taking root at home.
So what’s the market pricing in now? A 25-basis-point rate hike in November, with a 96% probability, taking the Bank Rate to 4%. It would be the first hike in three years. In the same week, the government borrowed £24.5 billion in September, up from £17.3 billion in August. The public finances are leaking too.
This isn’t just about oil prices. First, watch whether the Bank actually hikes in November or just talks tough—and whether sterling or long-term interest rates move first.
It was expected to be 3.4%, while the Bank of England itself forecast just 3.0% back in July. Both got it wrong.
Core CPI came in at 2.8%, up from 2.6% in August. Services inflation rose to 3.7%, from 3.4% the previous month. Petrol hit 169.5 pence a litre, up 8.2 pence in a month—the highest since August 2022.
Put simply, this isn’t just about oil prices.
The UK relies on imported natural gas. When war breaks out in the Gulf, gas prices rise first, followed by electricity and fuel costs. Then the pressure seeps into wages and service prices. Once it shows up in core and services inflation, the Bank of England can’t pretend not to see it, because it’s no longer an external shock—it’s inflation taking root at home.
So what’s the market pricing in now? A 25-basis-point rate hike in November, with a 96% probability, taking the Bank Rate to 4%. It would be the first hike in three years. In the same week, the government borrowed £24.5 billion in September, up from £17.3 billion in August. The public finances are leaking too.
This isn’t just about oil prices. First, watch whether the Bank actually hikes in November or just talks tough—and whether sterling or long-term interest rates move first.