UK Inflation Jumps to 3.5%, Solidifying BoE Rate Hike Expectations

UK inflation rose to 3.5% in September, exceeding the 3.4% forecast and marking the highest annual figure in nearly a year. The surge was primarily driven by motor fuel costs, which increased 29.8% year-over-year.

• Key Driver: Motor fuel inflation hit its highest level since August 2022.
• Policy Impact: Markets are now pricing in a 98% chance of a 25 basis point rate hike by the Bank of England next month, with further hikes expected in December.
• Analyst View: J.P. Morgan notes accelerating services inflation, raising concerns about second-round inflationary effects beyond energy prices [1].