FTSE 100 treads water near 10,500 as UK inflation undershoots forecasts
The FTSE 100 is trading around 10,500 after UK inflation came in below expectations, giving equities modest support but not enough to spark a decisive move. Investors are now focused on US retail sales, business inventories and tonight's Federal Reserve decision.
Chief Market Analyst
UK inflation data gives the FTSE 100 modest support
The FTSE 100 is trading around 10,500 after the latest UK inflation figures came in softer than markets had expected. The Office for National Statistics said the Consumer Prices Index rose by 2.8% in the 12 months to May, unchanged from April and below expectations for a rise towards 3.0%.
The monthly CPI increase was 0.2%, while CPIH inflation stayed at 3.0%. Core CPI edged up to 2.6% and services inflation rose to 3.7%, so the release was not uniformly soft. Transport costs made the largest upward contribution, while slower inflation in food and non-alcoholic beverages provided the largest offsetting drag.
Producer prices paint a more mixed inflation picture
The wider inflation picture remains nuanced. The Retail Prices Index stood at 3.1% in May, while producer-price data showed factory gate inflation easing slightly to 4.0% from a revised 4.1% in April.
Input producer prices, however, rose by 8.7% year on year, up from a revised 7.9% in April. That means today's data may calm some concerns about consumer-price persistence, but it does not remove cost pressure further up the supply chain. For the Bank of England, the report may support a cautious approach rather than a clear shift in policy expectations.
Fed decision keeps investors in wait-and-see mode
Attention now turns to the US session, where May retail sales and April business inventories are due before the Federal Reserve announces its policy decision. The Federal Open Market Committee meeting concludes later today, with the statement scheduled for 2pm ET and the press conference at 2:30pm ET.
For UK investors, the Fed's guidance may matter more than the rate decision itself. Any change in expectations for US Treasury yields could ripple through global equity valuations, currency markets and rate-sensitive areas of the FTSE 100.
Summer trading conditions may keep moves contained
The softer inflation print gives the UK market a near-term cushion, but the index still lacks a decisive catalyst while investors wait for the Fed. That leaves trading likely to remain subdued, with position-taking limited ahead of the evening policy update.
The market is also moving gradually into the quieter summer period, when lower volumes can make directional conviction harder to sustain. Against that backdrop, the FTSE 100 may continue to track global risk sentiment closely, especially if US data or the Fed's message changes the tone around interest rates.
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