UK inflation came in hot, jumping to 3% in January
UK and US inflation are twinning.
The United States and the United Kingdom have a lot in common: language, music, movies, and, as of this week, like-for-like inflation rates.
On Wednesday, the latest UK CPI print revealed that prices were up 3% in the last 12 months, a 10-month high and the exact same rate of price increases that the US reported last week. In contrast with the States, though, there was no eggflation to single out in the British figures. Instead, the Office for National Statistics dumped the blame on airfares, higher food costs, and more expensive private schools, with the BBC reporting that “private school fees grew by about 13%... after the government removed the [VAT] tax exemption.”
With inflation running ahead of the 2% target, the Bank of England’s tightrope act — keeping a lid on prices while kickstarting an economic engine that notched anemic growth of 0.1% in Q4 — just got a bit wobblier.
Investors on both sides of the pond, however, still expect rates to come down this year in spite of persistent inflation. Per Bloomberg data, Fed funds futures are pricing in 39 basis points of easing in 2025, while the market expects 50 bps of cuts for the Bank of England.
Wait, we’re winning?
The news weighed modestly on UK stocks, with the FTSE 100 down 1% since Tuesday, a small dampener on a solid start to the year for British names. Indeed, after months, years, and decades of being trounced by their American counterparts, UK stocks are actually slightly outperforming their stateside peers: the FTSE 100 is up 6% in 2025, ahead of the S&P 500’s 4% rise (never mind the fact that the flagship US index is up 84% in the last five years, vs. the FTSE’s 17% gain).
