UK FTSE 100 edges lower as inflation data strengthens BoE rate hike bets

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21.10.2026

UK FTSE 100 edges lower as inflation data strengthens BoE rate hike bets — FTSE 100 dips on inflation

British equities are holding near flat levels after two straight sessions of losses, as investors weigh persistent price pressures against support from stronger oil markets. The latest inflation reading for September comes in above expectations, reinforcing expectations that the Bank of England raises interest rates in November.

Highlights

FTSE 100 slips 0.1% to 10,723.02 as UK inflation rises to 3.5% in September, surpassing the 3.4% forecast and fueling rate hike bets.
Money markets now assign a 98.8% chance to a 25-basis-point Bank of England rate hike in November following higher energy prices linked to Middle East tensions.
Government borrowing surpasses forecasts for the second month, lifting public debt above £3 trillion and increasing pressure ahead of next week's budget.

Inflation data and market drivers

As reported by Reuters, the FTSE 100 falls 0.1% to 10,723.02 points by 1022 GMT on Wednesday, while the FTSE 250 is little changed at 0.02%. The move comes as UK inflation rises to 3.5% in September, above economists' expectations of 3.4%, with higher energy prices linked to the U.S.-Israel war on Iran.

Money markets are pricing in a 98.8% probability of a 25-basis-point Bank of England rate hike in November, according to LSEG data. Nick Saunders, chief executive of online investment platform Webull UK, says haulage and agriculture are likely to be hit hard, warning that a sustained rise in costs could trigger a damaging second-round shock for goods reaching consumers.

Energy gains offset by broader pressure

Energy stocks gain 1.1% as oil prices rise 1.2% on fears that escalating Middle East tensions could disrupt supply. BP and Shell are among the biggest supports for the blue-chip index as crude prices climb.

Elsewhere, finance minister John Healey is under pressure ahead of next week's budget after official data shows government borrowing exceeds forecasts for a second straight month, pushing public debt above 3 trillion pounds. On the company side, Aberdeen Group drops 3.5% after warning that inflows in its adviser segment are returning more slowly than expected, while Halfords falls about 9% on the FTSE 250 after its first-half results.

Our earlier report on Bank of England rate expectations highlighted how persistent inflation and firmer UK economic data were pushing economists toward a 25-basis-point hike at the November meeting. It also noted that higher energy prices linked to the U.S.-Israel conflict with Iran were a key risk factor, even as policymakers watched for broader pass-through to consumer prices and potential market volatility.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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