Weekly Market Update: 19 September 2025
Andrea Wood · Posted on: September 19th 2025 · read
On Wednesday, the US Federal Reserve announced a 25 basis-point cut to its benchmark interest rate, lowering it to a range of 4% to 4.25%. This marks the Fed’s first rate reduction of 2025, driven by signs of a cooling labour market and persistent economic uncertainty.
Chair Jerome Powell acknowledged that while inflation remains above the 2% target, the slowdown in job growth and rising unemployment led to the "risk management cut". The Fed hinted at the possibility of further cuts later this year, though internal divisions and political pressure from the White House have added complexity to its policy outlook.
The Bank of England's Monetary Policy Committee voted 7-2 to maintain its base interest rate at 4%
In further central bank news this week, on Thursday, the Bank of England's Monetary Policy Committee voted 7-2 to maintain its base interest rate at 4%. Despite stagnant GDP growth and signs of labour market weakness, inflation remains elevated at 3.8%, prompting the BoE to take a cautious approach. Governor Andrew Bailey noted that while the August rate cut provided some relief, the current economic environment, marked by fiscal uncertainty and global volatility, requires a wait-and-see strategy. Analysts expect the BoE to reassess its position after the Autumn Budget in November.
Food inflation rose for the fifth consecutive month, reaching 5.1%, driven by higher prices for vegetables, dairy, and fish.
The UK’s Consumer Prices Index (CPI) remained unchanged at 3.8% in August, matching July’s figure and staying well above the BoE’s 2% target. The data, released by the Office for National Statistics on Thursday, showed that food inflation rose for the fifth consecutive month, reaching 5.1%, driven by higher prices for vegetables, dairy, and fish. Core inflation, which excludes volatile items like food and energy, eased slightly to 3.6%, offering some relief. However, persistent price pressures - particularly in restaurants, hotels, and motor fuels - continue to strain household budgets.
Our specialist's final thought
"Economists warn that the UK remains an outlier among G7 nations, with inflation significantly higher than in Germany and France."
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