UK inflation rose to 3.5% in September, five days before the Budget

Last week in numbers

What happened

Inflation turned back up, and petrol did most of the work. The Office for National Statistics said on 21 October that annual CPI inflation rose to 3.5% in September from 3.1% in August, with CPIH at 3.6%. Transport made the largest upward contribution, and motor fuel prices were 29.8% higher over the year. Restaurants and hotels pulled the other way. Brent crude then rose about 5.5% over the week to $111.78 at Thursday's close, so the fuel effect has not finished working through. For portfolios, a higher starting point for inflation is the number against which cash, index-linked gilts and fixed income all get judged.

_Client impact: fuel and energy bills stay high, and money sitting in a deposit account is losing ground against a 3.5% price rise._

Gilt yields sat still ahead of the Budget. The 10-year gilt yield closed Thursday at 5.38%, which is where it closed the Thursday before. The Chancellor confirmed on 31 July that the Budget will be on Wednesday 28 October. Flat yields into a fiscal event of that size suggest the market is waiting for the detail rather than taking a position on it. Gilt yields matter to clients in two places that have nothing to do with equities: they set annuity pricing, and they drive the value of bond funds and the discount rate applied to defined benefit liabilities.

_Client impact: annuity rates have held steady for a week, and bond fund valuations with them._

Shares gave back ground and gold cooled at the same time. The FTSE 100 fell about 1.1% on the week and the FTSE 250 about 0.9%, with the S&P 500 down about 0.8% and the Nikkei 225 down about 2.4%. The Stoxx Europe 600 was the exception, up about 0.1%. Gold fell about 2.5% to $4,067 after a long run up. A week in which equities and gold both fell, with no offsetting rally in bonds, is a useful reminder for clients that diversification is measured over years and not over five trading days.

_Client impact: pension and ISA valuations are a little lower than a week ago, and the gold holding did not cushion it._

The Pensions Regulator asked trustees to look for exposure they cannot see. TPR published guidance on 22 October asking trustees to assess their total portfolio exposure to AI-related risk, direct and indirect, rather than looking at funds or asset classes one at a time, and to use scenario analysis to test whether diversification would still hold if correlations shifted in a stressed market. The regulator said trustees should test portfolio resilience and challenge their advisers now. The same question applies on the retail side, where a client's model portfolio can reach the same handful of large technology holdings through several different global funds.

_Client impact: the "spread across ten funds" answer is worth checking before a client asks what they actually own._

The week ahead

There is no MPC meeting next week. The Bank's next rate announcement is on 5 November, alongside the Monetary Policy Report.

Two to watch. The Budget on Wednesday is the one event most likely to move UK assets, because it lands on a gilt market that has spent the week refusing to take a view. The Fed decision hours later matters for anyone holding US assets unhedged, since the dollar leg has done as much for sterling investors this year as the equity leg.

Adviser corner: the advice rules are about to shift again

Speaking at the Investment Association annual dinner on 20 October, the FCA's deputy chief executive said the regulator is "just past peak rule making" and that it will publish updated rules on simplified advice, with case studies developed alongside the Financial Ombudsman Service. She said more than a dozen firms were authorised to offer targeted support within six months of that regime opening. The practical step is a process one rather than a product one: list the client segments your firm currently serves with nothing, decide which of them targeted support or simplified advice could reach, and name who would own that process before the rules land. What suits any individual client depends on their own circumstances.

_This article is for information only and reflects market conditions at the time of writing. It is not investment, tax or financial advice and should not be relied on as such. The value of investments and the income from them can fall as well as rise, and investors may get back less than they put in. Past performance is not a reliable indicator of future results. Advisers should consider the suitability of any action for individual clients. Issued by Wealth Analytica._

Sources

• Wealth Analytica: Markets, live index, bond, currency and commodity data
• ONS: Consumer price inflation, UK, September 2026
• FTSE 100 daily closing levels
• FTSE 250 daily closing levels
• Bank of England: Bank Rate
• Bank of England: upcoming MPC dates
• Federal Reserve: open market operations and the target range
• Federal Reserve: FOMC meeting calendar
• ECB: Governing Council monetary policy meeting dates
• BEA: release schedule
• HM Treasury: the Chancellor confirmed the Budget date
• The Pensions Regulator: expectations on hidden concentration risks in pension portfolios
• FCA speech: Reshaping regulation, deliberately