TS Pulse: Calm before no change

The Fed and ECB meet this week but neither is expected to change rates. However, what is said after the rate announcements is likely to be key for markets. 

• UK inflation jumped to 3.5% in September, its highest level since October last year, and slightly ahead of market expectations. Petrol prices rose 8.2 pence per litre month-on-month and diesel prices increased 10.7 pence, both four-year highs, and pushed motor fuel inflation to 29.8% from 23.0% in August. The core measure also rose, for the first time in four months, to 2.8%, when 2.7% was forecast. This put another nail in the case for a hike at the next MPC meeting, shifting the market implied chance of a hike from 94% to 97%. 
• Brent Crude Oil hit $117 a barrel for the first time since June 2022 as hostilities between the Iran-backed Houthis and Saudi Arabia ramped up and reports of attacks on vessels in the Strait of Hormuz despite flows recovering to some extent. 
• UK national debt topped £3 trillion for the first time, as the government borrowed more than forecast in the first half of the fiscal year. The deficit for April to September widened to £97.8 billion – £6 billion more than the OBR forecast, adding to the difficulties chancellor John Healy has with his budget. 
• French PMI flash readings for October were expected to show expansionary readings, but all three were in contractionary territory, with Services decreasing to 48.4 from 51.2 points in September, Manufacturing to 49.3 from 50.6 and the Composite number to 48.4 from 51.1. Several factors contributed, including business confidence deteriorating to its lowest level since April 2020, with firms citing concerns over next year’s elections and public finances.
• France’s credit rating with Moody’s remained at Aa3, with the negative also staying. The agency said the rating is “underpinned by [France’s] wealthy and diversified economy as well as its highly competent public institutions,” while also mentioning slower growth and a higher deficit pushing the debt burden higher than expected. However, it did note that there is an “increased risk that the fragmentation of France’s political landscape will continue to impair the functioning of the country’s legislative institutions.”

Source: Bloomberg; pricing as per 27 October 2026

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