UK September CPI due as November BOE rate hike almost priced in

The September UK CPI release, scheduled for 0600 GMT, takes centre stage on today's economic calendar. Market participants will closely monitor the inflation data for clues on the Bank of England's next steps, though traders have already priced in a 25-basis-point rate hike in November with near certainty.

Analysts forecast the following figures:

• Headline CPI: estimated at +3.4% year-on-year, compared with +3.1% previously
• Core CPI: expected at +2.8% year-on-year, versus +2.6% prior

According to forecasts, inflation is set to rise again this month. That is unwelcome for the Bank of England, as price growth already significantly exceeds its 2% goal.

Energy costs will likely continue to be a major factor, but the key focus should be on underlying inflation, especially persistent services prices. If broader price pressures emerge, the Bank of England's task of balancing inflation and growth becomes even harder.

Market pricing shows roughly 96% probability of a 25-basis-point rate hike on 5 November. Therefore, even a higher-than-expected inflation print is unlikely to alter near-term expectations. However, it could reinforce the argument for additional tightening after November. Currently, the chance of a consecutive rate move in December stands at about 61%. How that percentage shifts following a hot report will be the key detail to watch.

Conversely, a weaker-than-anticipated inflation reading might be more notable. While it may not prevent a November rate hike altogether, it could lead traders to reduce their more hawkish expectations for the Bank of England.

Additionally, the autumn budget scheduled for 28 October is imminent. That budget, along with today's inflation data, will be another important factor for the Bank of England to weigh before its next decision.