The UK’s annual rate of inflation has stayed at the highest level since January 2024.
The reading dealt another blow to hopes of a Bank of England interest rate cut at its meeting this week.
Elsewhere, GSK and Microsoft have unveiled major investment plans ahead of Donald Trump’s second state visit to the UK.
FTSE 100 Live Wednesday
- Food price inflation tops 5%
- Federal Reserve to cut rates
- Barratt Redrow flags Budget caution
Market update: Centrica upgrade lifts shares, PZ Cussons up 10%
10:11 , Graeme EvansUpgraded Centrica shares and demand for retail stocks in the wake of another rise in food inflation today helped return the FTSE 100 index to positive territory.
London’s top flight followed a decline of 0.9% with a rise of 0.2% or 21.89 points to 9217.55, although the mood was cautious ahead of tonight’s Federal Reserve interest rate decision.
Traders are pricing in a quarter-point cut to a range of 4%-4.25%, with the main focus being on updated economic projections and the guidance of Federal Reserve chair Jerome Powell in his post-meeting press conference.
In contrast, the Bank of England is due to keep interest rates on hold tomorrow after August’s inflation figures showed an unchanged headline rate of 3.8%.
Food price inflation climbed for the fifth consecutive month, reaching 5.1% in the latest cost-of-living setback for UK households.
However, the update helped to underpin retail stocks in the FTSE 100 as Sainsbury’s rose 2% or 8p to 330.8p and Marks & Spencer lifted 10.8p to 354.2p.
British Gas owner Centrica led the top flight, rising 3.5% or 5.65p to 169p after Morgan Stanley lifted its recommendation to Overweight.
On the results front, Barratt Redrow shares failed to benefit from a bigger-than-expected 27% rise in pre-tax profits to £592 million.
The stock only managed a rise of 2.1p to 368.3p as traders focused on the housebuilder’s message on challenging trading conditions, including fears that a long wait for the Budget on 26 November will deter buyers.
Peel Hunt reiterated its Buy stance and 470p target price following the results.
The broker said: “While there are plenty of market and political uncertainties facing the UK housing industry in the short term, the need for increased output remains in place.
“We believe Barratt Redrow is well positioned post the Redrow deal to drive volumes and performance higher as the market recovers.”
The fallers board was dominated by stocks from the mining sector, while BP also fell 3.9p to 417.9p and NatWest eased 3p to 521.4p.
In the FTSE 250 index, Moonpig lifted 6% or 11.3p to 209.5p after the online greetings card firm reiterated guidance for the 2026 financial year and said its Greetz division has returned to like-for-like sales growth.
Among the small-caps, Carex and Imperial Leather business PZ Cussons jumped 10% or 6.9p to 73.2p after reporting continued progress against its strategy in annual results.
UK operations posted a stronger profit performance in the year to 31 May, although the overall surplus fell 8.1% to £41.1 million as currency movements led to a 2.7% decline in revenues to £513.8 million.
Microsoft unveils major UK investment
08:48 , Graeme EvansMicrosoft has pledged its biggest ever investment in the UK, with $30 billion (£22 billion) committed over the next four years.
Brad Smith, Microsoft vice chair and president, said half the money would be dedicated to capital expenditure on the UK’s cloud and AI infrastructure.
It will include building the country’s largest supercomputer - with more than 23,000 Nvidia GPUs - in partnership with Nscale.
The announcement is the latest in a series timed to coincide with President Trump’s second state visit to the UK.
Centrica leads robust FTSE 100, Moonpig shares jump 7%
08:29 , Graeme EvansThe FTSE 100 index has risen 7.35 points to 9203.01, with Centrica among the best performing stocks following a rise of 2% or 3.85p to 167.2p.
Barratt Redrow lifted 3.5p to 369.7p after a better-than-expected adjusted profit in annual results was offset by the builder’s expectations of a challenging 2025/26.
Richard Hunter, head of markets at Interactive Investor, said: “A detailed trading update in July removed the scope for any major shocks in this release, leading to investors placing more emphasis on the outlook.”
Persimmon shares also rose 9p to 1101.5p and Taylor Wimpey lifted 0.6p to 97.7p.
Mining stocks weighed on the top flight performance as Fresnillo fell 3% or 64p to 2178p, Anglo American lost 32p to 2544p and Rio Tinto eased 38p to 4611.5p.
In the FTSE 250, Moonpig shares jumped 7% or 13.8p to 212p after the online greetings card firm said it is trading in line with guidance for the 2026 financial year.
Federal Reserve set to cut interest rates
08:15 , Graeme EvansTraders are pricing in a quarter-point interest rate cut ahead of today’s Federal Reserve decision. This lowers the target range for the fed funds rate to 4%-4.25%.
The rate cut expectations mean Wall Street will be focused on updated inflation, unemployment and GDP projections, as well as the guidance of Federal Reserve chair Jerome Powell in his post-meeting press conference.
Emma Wall, head of platform investments at Hargreaves Lansdown, said: “While recession fears do remain for the US, we do not think the full impact of both the trade tariffs and the abolition of the de minimis tax have yet flushed through prices, and so the upward pressure on inflation is likely to remain for some months.
“The Fed will have to balance economic data in its path forward – making the case for two to three cuts, rather than four, over the next year.”
Inflation rate seen topping 4% next month
08:00 , Graeme EvansNext month’s rate of inflation is expected to top 4%, continuing the rebound from 1.7% a year ago due to rises in utilities, fuel and food inflation and some one-offs.
Today’s rate of 3.8% compares with the eurozone at 2.1% and the US at 2.9%.
Capital Economics said: “Unfavourable base effects will probably push up inflation in September, perhaps to around 4.1%. This is worrying when some measures of households’ inflation expectations have rebounded to a six-year high.”
The consultancy added: “We still expect the looser labour market to weaken wage growth and eventually bring down UK inflation to similar rates as in the US and the eurozone, which will allow the Bank of England to cut rates from 4% now to 3% by the end of next year.
“But we think the upside inflation risks are just too high for the Bank of England to cut interest rates tomorrow or, more significantly, at the following meeting in November.”
Food and drink inflation above 5%
07:46 , Graeme EvansFood and drink prices are rising at their fastest rate since January last year amid a new supermarket squeeze on household budgets.
Latest official figures show the inflation rate for food and non-alcoholic drinks rose to 5.1% in August, up from 4.9% in July.
It was the fifth successive month of accelerating food inflation and highest rate since January 2024. It is the first time the rate has been above 5% since February last year.
Some of the biggest rises were seen in everyday staples such as butter, up 18.9% in a year, coffee (15.4%), chocolate (15.4% and milk (12.6%). The price of beef and veal is 24.9% higher.
The overall headline rate of inflation as measured by the Consumer Prices Index was unchanged at 3.8%.
Barratt Redrow sees “limited growth” in 2026, flags Budget uncertainty
07:43 , Graeme EvansBarratt Redrow today forecast an increase in completions for the new financial year to between 17,200 and 17,800, up from 16,565 in the year to 29 June.
It reported solid reservation activity but said the extended period through to the Budget in November and related uncertainties around general taxation has introduced additional risk.
The update came as the group published annual results showing adjusted profit before tax at £591.6 million.
It said this figure came in ahead of market expectations, reflecting some margin improvement and cost synergies following last year’s merger of Barratt and Redrow being crystallised ahead of initial estimates.
Forward sales at 24 August were broadly in line with the previous year at 10,350 homes, with 7048 homes either exchanged or contracted
Chief executive David Thomas said: “While the housing market remains challenging and we anticipate limited growth in the 2026 financial year, the long-term fundamentals of the sector remain compelling.
“We have a unique offering, with three distinct leading brands with a strong land position and balance sheet and a clear strategy to deliver long-term, sustainable growth and 22,000 homes a year in the medium-term.”
He added: “It is vital that government policy is focused on reforming the planning system, removing barriers to investment and supporting purchasers, particularly first-time buyers, if the sector is to build the homes the country needs."
UK and US strike tech deal
07:16 , Graeme EvansBritain and the US have struck a tech deal that could bring billions of pounds of investment to the UK as President Donald Trump arrived for his second state visit.
The pact will see the UK and US co-operate in areas including artificial intelligence, quantum computing and nuclear power.
It comes alongside £31 billion of investment in Britain from America’s top technology companies, including 30 billion dollars (£22 billion) from Microsoft.
GSK unveils $30bn US investment plan
07:08 , Graeme EvansGSK today announced plans to invest $30 billion across the United States in research and development and supply chain infrastructure over the next five years.
The plan includes new $1.2 billion investment in manufacturing facilities, AI and advanced digital technologies, a move creating hundreds of US jobs.
GSK said the new facilities will bridge R&D and manufacturing across both the US and UK, strengthening the two countries’ leadership in life sciences.
The plans include the construction of an additional new biologics flex factory at Upper Merion, Pennsylvania to deliver potential best-in-class new medicines for respiratory disease and cancer. Work is planned to commence in 2026.
New AI and advanced digital technology capabilities are also planned across GSK’s existing five manufacturing sites in Pennsylvania, North Carolina, Maryland, and Montana.
Inflation rate unchanged at 3.8%
07:04 , Graeme EvansThe UK’s inflation rate stayed at 3.8% in August, the Office for National Statistics said today.
The figure is in line with City expectations, having risen to the highest level since January 2024 in the previous month’s release.
The core inflation rate fell to 3.6% from July’s 3.8%.
ONS chief economist Grant Fitzner said: “After last month’s increase, annual inflation was unchanged in August as various price movements offset each other.
“The cost of airfares was the main downward driver this month with prices rising less than a year ago following the large increase in July linked to the timing of the summer holidays.
“This was offset by a rise in prices at the pump and the cost of hotel accommodation falling less than this time last year. ”
He added: “Food price inflation climbed for the fifth consecutive month, with small increases seen across a range of vegetables, cheese and fish items.”
FTSE 100 steadies, Hang Seng index rallies
06:59 , Graeme EvansThe FTSE 100 index opens today’s session at a two-week low after weakness across European markets left London’s top flight 0.9% lower at 9195.66.
Wall Street posted a steady performance ahead of tonight’s expected Federal Reserve interest rate cut.
The Dow Jones Industrial Average fell 0.3%, while the S&P 500 index and Nasdaq Composite dipped 0.1% from their record highs of the previous session.
In Asia, the Nikkei 225 has fallen 0.4% but the Hang Seng index is 1.7% higher.
The FTSE 100 is seen starting today’s session about 0.1% higher. Sterling stood at $1.3647 prior to the release of monthly inflation figures.
