🇬🇧Cable FX Macro Weekly Note: U.K. Sep. CPI

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U.K. consumer prices eased slightly to 9.9% Y/y from the prior 10.1%, this was below the consensus forecast. The month-over-month figure posted a 0.5%, easing from the prior 0.6%, while the core print came in at 6.3% Y/y, this was higher than the consensus median forecast. All sectors recorded monthly increases except for transport and communications, the latter posted a second month of declines at -0.7%, the former came in at -1.3%. The largest gain was seen in food items, prices eased from the prior as they printed 1.5% M/m, this leaves food prices up 13.1% Y/ y, the highest seen since 2008. Household prices reversed July declines after rising 1.3% M/m or 10.1% Y/y, the series is off highs but remains near record levels. Regardless of the marginal easing in prices, U.K. inflation remains almost five times above the BoE’s target, in fact, the U.K. and EU now top the chart in G10 inflation above target rankings. At the time of the August release, markets were relieved by a potential energy support package, as this could reduce the need for a more aggressive BoE hiking and a faster return to target in inflation figures. The pricing in overnight index swaps market was reduced for the November meeting, however, the declines were reversed, while U.K. markets saw historical moves on the back of the government ‘mini budget.’ The desk at UBS sees CPI and the OBR’s medium-term fiscal package as main events heading into the next BoE monetary policy meeting. Despite softer growth indicators, they hold their view of higher rates with upside risks to the outlook. After the market reaction to the U.K.’s government fiscal package, UBS penciled the BoE to hike the Bank Rate by an additional 225bps, up from the prior view of 100bps, they see the BoE tightening by 75bps on the November and December meetings.