US inflation hits 3.7% and rate-rise bets grow. The Bank of England's chief economist doubts a run of four UK rises
US consumer prices accelerated in September, the FT, BBC and Reuters reported; the FT put the annual rate at 3.7% and blamed the Iran war and dearer petrol, and Reuters said the core measure, which excludes food and energy, was also firmer. Bloomberg and the FT said stocks, bonds and chip shares fell and that traders raised bets on a Federal Reserve rate rise. By Thursday morning in Asia, Reuters said, the dollar had retreated from an 18-month high as Fed officials played down the pace of any rises. In Britain, City AM and the Mail reported that the Bank of England's chief economist is sceptical of market forecasts of four rate rises. Sterling hit a 16-month high against the euro on Wednesday, Reuters reported.
Interest rates decide mortgage costs, savings returns and the Chancellor's room for manoeuvre. If US rates rise, borrowing costs tend to rise elsewhere, and a sell-off in AI-linked shares could weigh on pension funds.
If you are on a tracker or variable mortgage, or soon to remortgage, the market's rate expectations matter. They are expectations, not decisions.
Rate-rise advocates say inflation above 3% justifies action before it becomes embedded.
Doubters, including the Bank economist cited by City AM and the Mail, say markets have gone too far, and that higher rates would hurt an already slow economy.
Wall Street's closing levels and the FTSE 100 close were not confirmed from two sources, so we give no index levels. The things to watch are the Bank's next rate decision and the next US inflation reading.
DailyDrop U.K. edition No. 11 · Morning · THU., OCT. 15, 2026