September’s faster inflation pace put the Bank of England’s next move in focus, while sterling stayed close to $1.34 ahead of the U.K.’s September retail-sales release on Friday.
Reuters’ market update at 5:45 a.m. ET (09:45 UTC) Wednesday, Oct. 21, put the pound at $1.339, up 0.1%. Money-market pricing had absorbed most of a quarter-point rise for November, Reuters reported, citing data compiled by LSEG.
The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) was 3.5% higher than a year earlier in September, compared with 3.1% in August. Prices also rose 0.4% from August. The annual reading exceeded the 3.4% forecast in a Reuters poll. Core inflation increased to 2.8% from 2.6%, while services inflation reached 3.7%, up from 3.4%.
Between August and September, transport, especially motor fuels, accounted for more of the rise in the annual CPI rate than any other category, the ONS said. Diesel averaged 192.5 pence per liter, its highest price since July 2022, and motor-fuel prices were 29.8% above their year-earlier level. Fuel-sales volumes fell in August as prices climbed. Retailers suggested some motorists might be changing their habits, including by leaving part of their tanks unfilled.
The Bank of England held Bank Rate at 3.75% in September. Three members of its Monetary Policy Committee supported raising it to 4%. The Bank said it had seen little evidence that higher energy costs had significantly spread into wages and other prices, while warning that the risk could grow if energy prices stayed high. Bank of England Gov. Andrew Bailey said Sept. 17, “So far that feed through has been quite subdued.” The Bank’s minutes linked energy-price concerns to the prolonged conflict in the Middle East and said households and businesses had faced higher interest rates since it began.
ONS data show August retail-sales volumes increased 0.5% from July and stood 2.4% above their level a year earlier. The agency is scheduled to release September sales data Oct. 23. The Bank of England’s next rate decision is due Nov. 5.
