British CPI Inflation Not as High in September as Thought – Currency Thoughts
British CPI Inflation Not as High in September as Thought
October 22, 2025
Less than 36 hours ago, investors were anticipating key meetings between President Trump and the leaders of Russia and China later this month. Symptomatic of other geopolitical flip-flops, each of those meetings now seems in doubt. This second Trump administration has been loaded with press events and other news-worthy events to a much greater extent than prior administrations. However, with the content of these pronouncements seemingly resting on shifting sand, it becomes harder and harder to discern what is real from what is not. As the U.S. federal government chugs on, a lack of timely data contributes further to the confusion.
The dollar hasn’t moved much thus far today. Net changes since Tuesday’s close have been zero percent against the currencies of Switzerland, New Zealand, Australia, and South Korea and no more than 0.1% versus those of Japan, Canada or Euroland. A 0.3% advance against sterling reflects released British price data that make a further rate cut by the Bank of England appear more likely.
Equity movements have been skewed toward moderate losses thus far today but with exceptions such as a 0.9% rise in the British FTSE and a 1.6% higher close in the South Korean Kospi index. The largest declines involve ones of 1.0% in Indonesia, 0.9% in Hong Kong, 0.7% in Australia, and 0.6% in Italy.
Among today’s moves in ten-year sovereign debt yields, an eight-basis point drop in the British gilt sticks out. The 10-year U.S. Treasury and Japanese JGB yields are two basis points lower, and those in France and Italy have ticked down a basis point.
The prices of oil (+2.1%) and gold (-2.2%) have diverged. Bitcoin is 0.7% lower.
Central bank interest rate reviews in Indonesia and Azerbaijan left policies unchanged. The decision by Bank Indonesia officials was not expected.Four times since May, their rate had been sliced by 25 basis points, and analysts were anticipating that the 4.75% 7-day reverse repo rate would be cut again this month. Officials instead decided to pause their easing to shield the rupiah from selling pressure and to allow more time to assess better the result on market interest rates of the moves they had made recently. Indonesian CPI inflation of 2.65% as of September was at a 16-month high but within the 1.5-3.5% target in which it is project to remain. All in all, the pause in rate cuts, which began from 6.25% in September 2024 is likely to prove temporary.
The Azerbaijani central bank refinancing rate has been at a 4-year low of 7.0% since July. CPI inflation in that economy of 5.7% in September was at a 3-month high and close to the top of 2-6% target. There had been a rate cut as recently as July. Since late 2023, two 50-basis point cuts followed by four 25-basis point decreases have been implemented.
European Central Bank President Lagarde expressed great satisfaction with the current monetary stance and suggested that the rate may be left unchanged for all of next year.
British consumer price inflation was thought likely to show a 4-handle in September but instead printed at 3.8% for the third straight month. Core CPI inflation of 3.5% was 0.1 percentage point lower than in August and also below forecaster expectations. The food component fell to a 3-month low, and the services component was 4.7% for the fourth time in the past five months. Retail price inflation dipped to a 3-month low of 4.5% from 4.6%, and producer input price inflation of 0.8% stayed under 1.0%. On the other hand, total producer output price inflation accelerated to a 28-month high of 3.4% and was associated with a 26-month high of 3.6% when excluding food and energy.
Among other price data released around the world today,
- South African consumer price inflation ticked higher to 3.4% overall in September from 3.3% in August and a 57-month low of 2.7% in March.
- Malaysian CPI inflation of 1.5% last month was its highest in 7 months.
- Irish wholesale price inflation of -2.6% in September was its least deflationary since May.
- Producer price inflation increased 1.7 percentage points to a 2-year peak in September of 7.1%.
- South Korean PPI inflation doubled to a 6-month high of 1.2% last month.
A Japanese trade deficit of JPY 234.6 billion in September was in the red for the fifth time in the last six months and 23.4% narrower than the deficit recorded a year earlier. The January-September deficit of JPY 2.826 trillion was down from a deficit of JPY 4.756 trillion a year earlier. When adjusted for seasonal bias, the deficit of JPY 314 billion in September was the biggest since a gap of JPY 351 billion last April.
Belgian consumer sentiment rose modestly to a 22-month high in October.
U.S. mortgage applications declined for a fourth straight time last week even though the 30-year fixed mortgage rate of 6.37% was its lowest level in a month.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, British CPI and PPI, Central Bank of Azerbaijan, ECB President Lagarde
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