Economists expect UK annual inflation for September to reach 3.4 percent, with the figure due on Wednesday. Markets increasingly expect the Bank of England to raise interest rates at its meeting on 5 November. Bloomberg Economics expects a 25 basis point hike in November and another in February.
Energy and conflict drive the outlook
Energy price increases and prolonged conflicts in the Middle East are cited as drivers of inflation. Global bond sales following the energy price rises are pushing up UK borrowing costs. Government bond yields are approaching recent highs.
Bloomberg Economics points to rising inflation, strong demand and a stable labour market as reasons a rate hike may be needed. The Bank of England projects that inflation could exceed 4 percent in early 2027, against its 2 percent target.
Budget pressure builds
Chancellor John Healey is set to present a budget next week aimed at easing pressure on businesses and households. Higher borrowing costs complicate that task. Tax increases to finance cost-of-living measures are considered possible.
US annual inflation stood at 3.7 percent in September, near its 31-day high.
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Data: FRED — St. Louis Fed
