UK inflation climbs to 3.5% as US business activity holds at 57.6
Price pressures strengthened in Britain and the United States while China's growth edged up, setting up five central bank decisions between Oct. 28 and Oct. 30.
- UK consumer prices rose 3.5% in the 12 months to September, up from 3.1% in August, the Office for National Statistics said.
- S&P Global's flash October PMIs put US business activity at 57.6, the UK at 53.1 and the euro area at 51.9.
- The Federal Reserve decides on Oct. 28, the Bank of Japan on Oct. 30 and the Bank of England on Nov. 5.
UK consumer prices rose 3.5% in the 12 months to September, the Office for National Statistics said on Oct. 21, in the week of Oct. 19-25, as flash PMIs put US activity at 57.6.
UK inflation accelerates to 3.5% on motor fuel and markets price a November hike
The Office for National Statistics said the consumer price index rose 3.5% in the 12 months to September, up from 3.1% in August. Core inflation, which excludes energy, food, alcohol and tobacco, rose to 2.8% from 2.6%.
Motor fuel prices rose 29.8% over the year, and petrol and diesel reached their highest prices since 2022, according to the statistics office. Services inflation climbed to 3.7% from 3.4%.
Forecasts stood at 3.4% for the headline rate, according to Babypips. The reading beat that forecast by 0.1 percentage point, our calculation: 3.5 - 3.4.
The Bank of England's Bank Rate is 3.75%, Babypips reported, and its next meeting is on Nov. 5. Citing LSEG data, Reuters put the odds of a quarter-point hike above 90%.
The Bank Rate sits 0.25 percentage points above annual inflation, our calculation: 3.75 - 3.5. That is market pricing, not a Bank of England commitment.
Flash PMIs show US activity at 57.6 while euro area growth slows to a four-month low
S&P Global's flash US PMI put the composite output index at 57.6 in October, down from 58.4 in September. The services index was 57.9, and the manufacturing PMI rose to 56.0 from 55.9.
S&P Global said US selling prices rose at the sharpest rate since August 2022. The composite fell 0.8 points in the month, our calculation: 57.6 - 58.4.
The flash euro area PMI showed the composite at 51.9, against 53.1 in September, a four-month low. That is a fall of 1.2 points, our calculation: 51.9 - 53.1.
S&P Global said input cost inflation accelerated in the euro area. In Britain, the composite rose to 53.1 from 52.0, an eight-month high, according to the release.
"Price pressures remain worryingly elevated," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in the UK flash PMI release on Oct. 23.
His point links the survey to the central banks. Faster activity with rising costs leaves less room to cut, which is why the PMI prices data matter for the Oct. 28-30 decisions.
China's growth edges up to 4.5% while the statistics bureau flags weak domestic demand
China's economy grew 4.5% year on year in the third quarter, against 4.3% in the second quarter, Xinhua reported on Oct. 19, citing the National Bureau of Statistics. Growth for the first three quarters was 4.6%.
The acceleration is 0.2 percentage points, our calculation: 4.5 - 4.3. The target range for 2026 is 4.5% to 5%, according to Eastern Herald.
The same report said fixed-asset investment fell 7.2% in the first nine months and real estate development fell 20.6%. Consumer prices rose 0.9%.
The statistics bureau said insufficient domestic demand remains prominent, according to Eastern Herald. Growth is running at the bottom of the target range while investment shrinks.
Japan's core inflation reaches 2.1% and the Bank of Korea holds at 3.00%
Japan's core consumer price index, which excludes fresh food, rose 2.1% year on year in September, up from 1.7% in August, investinglive reported on Oct. 23. It was the first reading above 2% since December.
The measure that excludes food and energy rose 2.4%, against 1.9% in August. The Bank of Japan raised its policy rate to 1.25% in September in a 7-2 vote, according to the same report.
The Bank of Korea kept its base rate at 3.00% on Oct. 22, with all seven board members in favor, the bank said.
Korean consumer inflation was 2.9% in September, and core inflation was 2.8%, the bank said. It will decide the timing and pace of further hikes on incoming data.
The Fed's September hike frames the Oct. 28 decision
The Federal Open Market Committee raised the federal funds target range by a quarter point to 3.75%-4.00% in a 12-0 vote in September, according to the minutes of its Sept. 15-16 meeting.
Most participants said another increase would likely be appropriate by year end, the minutes show. They added that decisions at later meetings would depend on incoming information.
FXStreet reported that the Fed is expected to leave rates unchanged on Oct. 28. A later FXStreet report put the odds of a December hike near 80%.
The week in numbers
| Indicator | Latest | Previous | Source |
|---|---|---|---|
| UK consumer prices, Sept. (year on year) | 3.5% | 3.1% | ONS |
| UK core consumer prices, Sept. (year on year) | 2.8% | 2.6% | ONS |
| US flash composite PMI, Oct. | 57.6 | 58.4 | S&P Global |
| Euro area flash composite PMI, Oct. | 51.9 | 53.1 | S&P Global |
| China GDP, Q3 (year on year) | 4.5% | 4.3% | Xinhua |
| Japan core consumer prices, Sept. (year on year) | 2.1% | 1.7% | investinglive |
| Bank of Korea base rate, Oct. 22 | 3.00% | 3.00% | Bank of Korea |
As of Oct. 25. Previous is the prior month, quarter or decision as published by each source; gaps in the text are our calculation.
Five central banks decide between Oct. 28 and Oct. 30
- Oct. 28: the Fed's two-day meeting ends, with the decision at 2:00 p.m. ET and a press conference at 2:30 p.m. ET, according to the Fed calendar. FXStreet lists the Bank of Canada and the Reserve Bank of New Zealand the same day, with 25 basis point hikes expected.
- Oct. 29: the European Central Bank meets, with no change expected, according to FXStreet. US advance third-quarter GDP and the PCE price index are also due.
- Oct. 30: the Bank of Japan decides and is widely expected to hold at 1.25%, according to investinglive; euro area third-quarter GDP is also due.
- Nov. 5: the Bank of England meets, with a quarter-point hike priced by markets, according to Babypips.
How we reported this: We opened each linked source on Oct. 26. Gaps between figures are our calculation. Consensus and market pricing come from secondary reports, and we do not know how the central banks will vote.