UK inflation rose to 2.3% year-on-year in October, compared to 1.7% in September.

This was higher than the market estimate of 2.2%. The main drivers of the gain were higher housing prices and the rise in the government’s energy cap.

Core inflation, which excludes energy and food items, inched upwards to 3.3%, up from 3.2% in September and above the market estimate of 3.1%.

Monthly, headline CPI climbed 0.6% in October, up from 0% in September and above the market estimate of 0.5%. Core inflation rose 0.4%, above the September gain of 0.1% and higher than the market estimate of 0.3%.

The Bank of England has done a good job of slashing inflation, which hit double digits in early 2023. Inflation is now close to the BoE’s 2% target but policymakers are under no illusions that the tough battle against inflation is over. Core inflation remains high and the Trump election win has raised fears that US trade tariffs could lead to higher inflation not just in the US, but around the globe.

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The jump in the October inflation report will likely dampen expectations for a back-to-back rate cut at the December 19th rate meeting. The next inflation report will be crucial, coming just one day before the rate meeting.

The GBP/USD currency pair showed little movement after the inflation report. The pound is trading at 1.2668 at the time of writing, 0.1% higher on the day.

The FTSE 100 index, the main UK stock market index, is almost unchanged today. Currently, it is down 7.6 points (0.1%), on the day at 8090 points.

Canada’s Inflation Rises to 2% 

Canada’s inflation rate rose to an annualized rate of 2.0% in October, higher than the 1.6% gain in September, which was a three-year low. This was just above the market estimate of 1.9%. The increase was largely driven by a smaller decline in gas prices in October. Monthly, inflation rose 0.4%, after a decline of 0.4% in September and higher than the market estimate of 0.3%.
 

Core inflation, which excludes energy and food, also moved higher in October. The two key core indicators rose to an average of 2.55% y/y, up from 2.35% in September. Services inflation eased to 3.6%, its lowest level since January 2022, but still much higher than the Bank of Canada’s 2% target. This is the last inflation report before the central bank’s next rate meeting on Dec. 11.

The USD/CAD currency pair sustained strong losses after the inflation report, declining 0.50%. The pair closed on Wednesday at 1.3956, down 0.42%.

The benchmark Canadian index, the S&P/TSX, showed little movement on Wednesday, gaining 33 points (0.14%) and closing at 25,010 points.

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