London pre-open: Stocks to edge up after UK inflation reading, ahead of Fed

(Sharecast News) - London stocks were set to edge up at the open on Wednesday as investors mulled the latest UK inflation reading and looked ahead to policy announcements from the Federal Reserve and the Bank of England.

The FTSE 100 was called to open around 10 points higher.

Kathleen Brooks, research director at XTB, said: "The Fed meeting later this evening is one of the most hotly anticipated for the year so far. The consequences of this meeting will be felt in two ways, the immediate decision and the longer-term consequences.

"The market is expecting the Fed to cut interest rates by 25bps, with a small 4% chance of a larger 50bp rate cut. We think that a 25bp cut is expected as the slowdown in the labour market justifies Fed action to support the economy to full employment. However, the market is likely to be more sensitive to what the Fed signals will happen in the future, and if they are embarking on a prolonged rate cutting cycle.

"This meeting will also see the updated Dot Plot, where Fed members give their views on where interest rates will be in the coming months. This was last updated in June, and back then, the median estimate of FOMC members were for interest rates to be 3.87% in 2025, 3.6% in 2026, and 3.37% further out the curve."

On home shores, figures released earlier by the Office for National Statistics showed that inflation remained unchanged in August, underpinned by higher food prices.

The consumer prices index was 3.8% in the 12 months to August, unchanged on July and in line with expectations. On a monthly basis, CPI rose by 0.3%, also in line with consensus.

However, the core inflation rate - which strips out the more volatile elements of energy, food, alcohol and tobacco - softened to 3.6% from 3.8%.

Grant Fitzner, chief economist at the ONS, said a number of price movements had offset each other during the month.

He continued: "The cost of airfares was the main downward driver, with prices rising less than a year ago following the large increase in July, linked to the timing of the summer holidays.

"This was offset by a rise in prices at the pump and the cost of hotel accommodation falling less than this time last year.

"Food price inflation climbed for the fifth consecutive month, with small increases seen across a range of vegetables, cheese and fish items."

Food prices soared 5.1% in August, up from 4.9% in July. It was the highest recorded rate since January 2024, although remains well below the peak seen in early 2023.

Including housing costs, inflation rose by 4.1% in the 12 months to August, down from 4.2% a month previously. Month-on-month CPIH rose 0.3%.

The Bank of England meets on Thursday to discuss interest rates. Already expected to leave the cost of borrowing unchanged, at 4%, today's data will likely strengthen that case.

In corporate news, housebuilder Barratt Redrow delivered annual profits ahead of forecasts despite completions missing its initial guidance range, helping the company to lift its dividend more than expected.

Adjusted pre-tax profit totalled �591.6m over the 12 months to 29 June, up 26.8% year-on-year and ahead of the �582.8m consensus estimate, while the total dividend was raised by 8.6% to 17.6p per share, compared with the 16.8p expected by analysts.

Elsewhere, GSK announced plans to invest $30bn across the US in research and development and supply chain infrastructure over the next five years.

This includes a new $1.2bn investment in advanced manufacturing facilities and AI and advanced digital technologies, to deliver new, next-generation biopharma factories and laboratories.