What to expect from the next UK inflation report? <\/p>\n
The UK headline Consumer Price Index is forecast<\/a> to have accelerated to a 4% annual rate in September* from the 3.8% YoY seen in\u00a0 August. If these figures are confirmed, it will be the strongest inflation reading since January 2024, and twice as high as the BoE\u2019s 2% target for price stability.<\/p>\n Source: National Statistics<\/p>\n The UK core CPI, considered more relevant for the central bank, as it strips off the seasonal impact of food and energy prices, is also expected to have heated, although at a milder pace. The UK\u2019s core inflation is seen at 3.7% YoY in September, from the previous month\u2019s 3.6% reading.<\/p>\n Monthly inflation is expected to have risen 0.2%, both headline and core CPI, following 0.3% advances in August.<\/p>\n Together with consumer inflation, National Statistics is expected to release the Retail Prices Index numbers, which are also expected to have picked up to a 4.7% YoY growth last month, from 4.6% in August. The Bank of England\u2019s Chief Economist, Huw Pill, has endorsed this view, affirming that the bank \u201cneeds to recognise CPI stubbornness as more pressing,\u201d and that \u201ca more cautious pace of withdrawing monetary policy restrictions than seen over the past year may be appropriate.\u201d<\/p>\n How will the UK Consumer Price Index report affect GBP\/USD?<\/p>\n A 4% inflation reading, as the market consensus anticipates, is likely to trigger a significant repricing of the Bank of England’s monetary easing prospects, which might provide some support to the British Pound.<\/p>\n Data released in previous weeks revealed that the UK labour market is stabilising, following declines in payrolls and vacancies earlier this year. National Statistics numbers showed that the Unemployment Rate ticked up to 4.8% in the three months to August, and net employment increased by 91K, following a 232K increment in July.\u00a0<\/p>\n Beyond that, Gross Domestic Product<\/a> (GDP) bounced up to 0.1% in August, buoyed by a 0.7% growth in Manufacturing Production. This reading partly reverses the 1.1% contraction seen in July and beats expectations of a 0.4% growth.<\/p>\n All in all, the figures reflect a solid economy that copes well in the face of an uncertain global trade scenario, allowing the Bank of England to hold rates at the current levels for some time.\u00a0\u00a0<\/p>\n At their latest monetary policy meeting in September, the UK central bank left its benchmark interest rate at 4%, with two dissenting members voting for a further rate cut. The meeting minutes already highlighted a more cautious approach to monetary easing amid persistent inflation risks.<\/p>\n In this context, a strong CPI, 4% or higher, would curb hopes of further rate cuts in the coming months and might give the Pound an additional impulse. Softer-than-expected data, on the contrary, might keep hopes of further monetary easing alive and add pressure on the GBP.<\/p>\n GBP\/USD 4-hour chart Regarding the GBP\/USD pair<\/a>, FXStreet analyst Guillermo Alcal\u00e1 sees price action correcting lower after peaking at 1.3470 last week: \u201cThe GBP\/USD recovery has been capped at the 1.3470 area, and the pair has been trading lower ever since, with the 61.8% Fibonacci retracement of the mid-October rally, at 1.3335 emerging as a plausible target for a bearish correction.\u201d<\/p>\n On the upside, Alcal\u00e1 sees a significant resistance area between 1.3470 and 1.3490: “Bulls, on the contrary, have remained capped below 1.3445, but the key resistance remains in the area between October 17 and 7 highs at 1.3470 and 1.3490, respectively.”<\/p>\n Economic Indicator<\/p>\n Consumer Price Index (YoY)<\/p>\n The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics<\/a> on a monthly basis, is a measure of consumer price inflation \u2013 the rate at which the prices of goods and services bought by households rise or fall \u2013 produced to international standards. It is the inflation measure used in the government\u2019s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.<\/p>\n<\/p>\n
<\/p>\n