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25 Nov 2025 | 3 minutes to read
The UK Consumer Prices Index (CPI) measure of inflation fell to 3.6% in the year to October according to figures from the Office for National Statistics (ONS) last week, down from 3.8% in September. Smaller rises in household energy costs eased inflationary pressures, but rising food prices continue to exert upward pressure. Consensus expectations had been for a slightly larger decline to 3.5%. It is the final inflation print before Chancellor Rachel Reeves delivers her much-anticipated Autumn Budget this week. While Reeves is keen to see inflation fall further, the Budget is expected to include various tax increases – some of which could be inflationary – although it now appears that increases to headline rates of income tax are off the table. Lower inflation increases the likelihood of an interest rate cut at the Bank of England’s (BoE) next meeting – albeit there will be one further CPI print for the Bank to digest ahead of that meeting on the 18 of December. Nevertheless, a cut is now widely anticipated before the end of the year. The latest inflation print also gives further credence to the view that the uptick in prices this year has peaked and extends a run of softer UK economic data points. However, with inflation still well above the BoE’s 2% target, and previous rate cuts taking time to filter through to economic activity, the BoE also need to be wary of cutting too far too quickly.
With the US government shutdown over, the flow of economic data resumed, with the six-week delayed non-farm payroll report for September painting a mixed picture of the US labour market. Jobs added rose by 119,000 – well above the 51,000 consensus – and much better than over the summer months when hiring slowed. Less encouragingly, the unemployment rate edged up from 4.3% to 4.4%, while a prior estimate for jobs growth in August was downgraded. Additionally, weekly jobless claims (new applications for unemployment benefits) fell by 8,000 to 220,000 for the week ending 15 November, slightly better than expected. However, continuing claims rose, suggesting that while fewer people were being laid off, those already out of work are finding it harder to secure new jobs amid softer hiring conditions. Overall, the delayed data appears to reaffirm the view that while labour demand has cooled, it is far from collapsing.
Jobs data will be closely watched by the rate setting Federal Open Market Committee (FOMC) at the Federal Reserve (Fed). Market participants were able to digest the minutes from the last Fed meeting in late October when they were released on Wednesday last week. These revealed a clear split among policymakers, casting doubt on the prospect of a December rate cut. The minutes noted that ‘many’ members argued for keeping rates unchanged for the rest of the year, while ‘several’ supported a December cut. In Fed parlance, ‘many’ is more than ‘several’, indicating a leaning towards keeping rates unchanged in December. Clear divisions beneath the surface at the Fed – amid a softening labour market and inflation that remains stubbornly above 2% – fuelled market volatility last week, as expectations for a December rate cut swung notably.
Recent market jitters were briefly alleviated after tech-giant Nvidia’s closely watched results came in ahead of expectations last week. The company also positively revised guidance. However, the prospect of an artificial intelligence (AI) bubble continues to concern some investors, who are trying to weigh-up the return on investment from AI infrastructure spend and apparent circular funding models amongst major players. Nvidia, which occupies a c.8% position in the S&P 500, had seen its share price drop 11% from an early November peak prior to last week’s earnings report. The announcement of a 62% year-on-year increase in revenues to $57bn for the company’s third quarter, and forecast revenue of $65bn for Q4, suggested continued momentum in the AI space – potentially easing concerns around the broader AI capital expenditure cycle.
Japan’s core inflation rate came in at 3% last week. The print was in line with expectations, but the data showed inflation in October rose at the fastest rate since July, while it has now remained above the Bank of Japan’s (BoJ) 2% target for 43 straight months. The BoJ is mindful of a weak yen as this could affect underlying inflation by pushing up import costs. New Prime Minister, Sanae Takaichi, is however seen as an advocate of loose monetary policy, while she followed through on her pledge to pursue expansionary fiscal measures by unveiling a $135bn economic stimulus package last Friday. The BoJ’s task is complicated by weakening economic growth as US tariffs begin to bite. Japanese GDP contracted by -0.4% quarter-on-quarter in Q3, an annualised decline of -1.8%. This was the first contraction in six quarters, although the decline was less than expected.
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