The inflation rate in the UK decreased to 4.6% in October from 6.7% in September.

October's UK inflation data fell short of expectations, but core inflation stayed high at 5.7% compared to 6.1% in September.

Highlights

• The yearly inflation rate in the UK decreased from 6.7% to 4.6% in October.
• The core inflation also lowered more than anticipated, leading to speculation about discussions regarding interest rate cuts.
• Today, attention will shift to US retail sales and producer prices.

The release of UK inflation data for October prompted significant investor attention. Despite wage growth figures aligning with the Bank of England Governor Andrew Bailey's perspective on premature interest rate cut discussions, the UK's annual inflation rate softened from 6.7% to 4.6% in October. Additionally, core inflation decreased from 6.1% to 5.7%, deviating from economists' forecasts of 4.8% and 5.8% for inflation rates, respectively.

As per the Office for National Statistics:

- The Consumer Prices Index including owner occupiers' housing costs (CPIH) annual inflation rate declined from 6.3% to 4.7% in October 2023.
- Deflationary pressures were observed in housing and household services, food and non-alcoholic beverages, and restaurants and hotels, with recreation and culture being the sole positive contributor.
- The annual inflation rate for food and non-alcoholic beverages dropped from 12.2% to 10.1% in October 2023, while that for restaurants and hotels softened from 8.6% to 7.6%.
- A notable observation was the annual inflation rate for housing and household services, which decreased from 5.7% to 1.9%.

The subdued inflation figures may prompt the Bank of England to initiate discussions about interest rate cuts.

The GBP/USD reacted to the UK inflation news by initially rising to a peak of $1.24949, falling subsequently to $1.24662, and by morning was down 0.24% to $1.24687. Looking ahead, Bank of England Monetary Policy Committee member Jonathan Haskel is scheduled to speak, providing insights on wage growth, inflation, and monetary policy.

In the US market, investor attention will shift towards economic indicators, including US retail sales and producer price numbers for October. This focus is expected to intensify following market sensitivity to the recent US CPI Report. Furthermore, monitoring Fed speeches, particularly by FOMC member Michael Barr, will be crucial, as recent US reports' influence on the US dollar's appeal will be a key consideration.