🇬🇧❗️Cable FX Macro Weekly Note: U.K. Consumer Prices

**As seen in Risk In The Week report 10/17/25, get full access now!

Headline CPI inflation was unchanged at 3.8% Y/y in August, driven by offsetting pressures: rising food and services costs balanced by softer transport (e.g., airfares). Core CPI (excluding energy, food, alcohol, and tobacco) eased slightly to 4.7% y/y from 5.0% in July.

The BoE anticipates a temporary peak of 4.0% in September 2025, influenced by energy base effects, food price surges, and government-set prices (e.g., taxes and regulated utilities). Services inflation eased to 4.7% Y/y, however, the median forecast expects the metric to accelerate to 4.9%. UK inflation has stabilized after declining through 2024 (from 11.1% peak in October 2022) but reaccelerated in 2025 due to food (+37.2% cumulative rise since 2020) and "administered prices" (e.g., council tax, water bills). Over five years to August 2025, consumer prices rose 28.2% total— far above the prior period's 8.3%.

Economists at UBS recently shifted forward their BoE rate cut call to February 2026. By removing the November cut, UBS raised its forecast for the terminal rate to 3.25% from 3%, while keeping its end-2025 Bank Rate projection at 4%. UBS still expects three 25-basis-point cuts in 2026, in February, April and July, to bring the rate to 3.25%.