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UK inflation jumps to 3.5%, cementing rate hike bets

First reported · Updated · 15 sources: investingLive, Reuters, CNBC

What happened

UK September CPI inflation rose to 3.5% year-on-year, above the 3.4% expected and the highest in nearly a year. Higher energy costs and stubborn services inflation keep pressure on the BOE, with a November rate hike almost fully priced in. The pound gained against the dollar and euro on the data.

What it means for markets

Stronger-than-expected inflation reinforces the case for a November BOE rate hike, supporting the pound and pressuring UK bonds. The FTSE 100 paused as the hot inflation report outweighed an energy boost. UK retail sales due next will test the case for further BOE rate hikes, offering clues on the December outlook.

AssetExpectedMove since first report
British pound FXB Pound gains against dollar and euro as inflation data cements rate hike bets
▲ Up
+0.57% 128.17 (2026-10-16) → 128.90 (2026-10-30)
Europe stocks VGK FTSE 100 pauses as hot inflation report outweighs energy boost
▼ Down
+0.29% 87.29 (2026-10-16) → 87.54 (2026-10-30)

What to watch

  • UK retail sales data for fresh clues on BOE December outlook
  • UK October flash services PMI (53.1 vs 51.8 expected)

Companies named

SPGI

Source timeline

  1. investingLive UK October flash services PMI 53.1 vs 51.8 expected
  2. investingLive Heads up: UK retail sales to test the case for further BOE rate hikes
  3. Reuters UK median full-time salary shows smallest increase since 2021
  4. Reuters UK's FTSE 100 pauses as hot inflation report outweighs energy boost
  5. Reuters South African inflation rises modestly but bigger fuel-driven jump seen in October
  6. Reuters Pound gains against dollar, euro as inflation data cements future rate hike bets
  7. CNBC UK inflation jumps to 3.5% — cementing rate hike expectations
  8. Reuters UK inflation jumps to highest in nearly a year at 3.5%
  9. investingLive UK September CPI +3.5% vs +3.4% y/y expected
  10. investingLive UK September CPI inflation rises to 3.5%, reinforces BOE November rate hike expectations
  11. investingLive Heads up: UK September CPI inflation report due today, BOE rate hike for November almost fully priced in
  12. investingLive UK August ILO unemployment rate 4.7% vs 5.0% expected
  13. investingLive UK unemployment rate falls to 4.7% as jobs rebound, keeping BOE rate hike bets intact
  14. investingLive Canada September CPI 3.1% y/y vs 3.2% expected
  15. investingLive Economic data spotlight: UK inflation set to climb as BOE rate hike and autumn budget collide

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