UK Inflation Hits 3.5% in September Strengthening BoE Rate Hike Bets

Key Facts

1UK headline CPI for September rose to 3.5% year-on-year, slightly exceeding the 3.4% expected by markets.

2The higher inflation data solidified market expectations for a 25 bps Bank of England rate hike in November, priced at 96%.

UK headline CPI for September rose to 3.5% year-on-year, slightly exceeding the 3.4% expected by markets. According to investinglive.com, the increase was primarily driven by higher energy costs, while core inflation also accelerated to 2.8% from 2.6% in the previous period.

The higher inflation data solidified market expectations for a 25 bps Bank of England rate hike in November, which is now priced at 96%. This inflationary pressure follows labor market data from October 20, 2026, which showed the unemployment rate falling to 4.7%, better than the 4.9% forecast, indicating sustained tightness in the UK economy.

Bank of England Governor Andrew Bailey is scheduled to deliver a speech later today, October 21, 2026. Markets are also awaiting retail sales data and Manufacturing and Services PMI readings scheduled for release on October 23, 2026, to further gauge economic momentum.