UK CPI Confirms Boe Unlikely To Cut, FOMC In Focus

(MENAFN- Mid-East Info) By Daniela Sabin Hathorn, senior market analyst at Capital

The UK CPI for August 2025 has been released this morning, coming in at 3.8% year on year, unchanged from July, with monthly inflation at 0.3%, as expected. Under the hood, core CPI eased to 3.6%, while services inflation-crucial for the Bank of England-slowed to 4.7%. The ONS breakdown cited softer airfares offset by strength in categories such as restaurants, hotels and motor fuels; food and drink inflation picked up to about 5.1%.

The mix broadly matched expectations and keeps the BoE focused on sticky domestic pressures without adding urgency to cut again this week. The bank has flagged a possible near-term uptick toward 4% in September before a gradual drift lower, so the reading is seen as confirming the likely outcome of the central bank's meeting tomorrow, keeping rates unchanged at 4%. The reaction in UK assets has been muted as focus remains on a few busy hours ahead with the likelihood of fresh volatility around the FOMC meeting.

For now, equities seem to be easing the foot off the gas with some consolidation around recent highs in both the S&P 500 and Nasdaq 100. The upside may resume after the meeting; however, the risks are slightly skewed to the downside as Powell and his team have a lot of dovishness to live up to. Any shortcomings could spark a fresh wave of risk-off sentiment even if the path forward remains dovish. In this case, we could see momentum shift into yields and the dollar, with equities retracing and resetting some of the recent overbought positioning.

GBP/USD daily chart:

Past performance is not a reliable indicator of future results.

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