Sterling slumps as UK inflation declines sharply

The British pound dropped after UK inflation data for September revealed a sharper-than-expected decline, falling below the Bank of England’s 2% target for the first time in over three years. Core inflation also fell more than forecast, signaling a stronger pace of disinflation. Services prices, a key inflation driver, slowed, reinforcing the view that inflationary pressures in the UK are easing faster than expected.

This data strengthens the case for the BoE to shift towards monetary easing, with markets now expecting a 25 basis point rate cut at its November 8 meeting. The weakening inflation gives the BoE room to ease policy to support growth.

UK CPI falls to 1.7% in September, core CPI at 3.2%

UK headline CPI dropped from 2.2% year-on-year in August to 1.7% in September, below the forecast of 1.9%. Core CPI, which excludes energy and food, slowed from 3.6% to 3.2%. Goods prices fell further, while services inflation cooled from 5.6% to 4.9%.

New Zealand CPI drops to 2.2% in Q3

New Zealand's CPI rose 0.6% quarter-on-quarter in Q3, slightly below the expected 0.7%. On an annual basis, inflation dropped from 3.3% to 2.2%, marking the first time since March 2021 that inflation fell within the Reserve Bank of New Zealand's target range of 1-3%.

Fed’s Bostic signals one more rate cut in 2024

Atlanta Fed President Raphael Bostic indicated the Fed could implement one more 25 basis point rate cut in 2024. He noted the Fed’s median projection calls for another 50 basis points of cuts this year. San Francisco Fed President Mary Daly also suggested that “one or two” additional cuts may be appropriate, emphasizing the importance of adjusting the pace rather than the final level of easing.

Daly added that the economy is in a "better place," citing progress in reducing inflation and a more sustainable labor market.