# This week in charts: UK inflation's ripple effect

**URL:** <https://community.investengine.com/t/this-week-in-charts-uk-inflations-ripple-effect/2219>\
**Category:** Our News\
**Created:** [21 February 2025 15:45 UTC](https://community.investengine.com/t/this-week-in-charts-uk-inflations-ripple-effect/2219 "2025-02-21T15:45:03Z")\
**Posts on this page:** 1\
**Page:** 1

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**Author:** ![InvestEngine-News](https://dub1.discourse-cdn.com/flex017/user_avatar/community.investengine.com/investengine-news/32/575_2.png) [@InvestEngine-News](https://community.investengine.com/u/InvestEngine-News)\
**Post date:** [21 February 2025 15:45 UTC](https://community.investengine.com/t/this-week-in-charts-uk-inflations-ripple-effect/2219/1 "2025-02-21T15:45:03Z")

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Originally published at: [This week in charts: UK inflation’s ripple effect – InvestEngine Insights](https://blog.investengine.com/this-week-in-charts-uk-inflations-ripple-effect/)

## **UK inflation higher than expected…**

The main market news this week was the release of UK inflation data. Headline inflation climbed to 3% in January (up from 2.5% in December), surpassing consensus forecasts of 2.8% and marking a 10-month high. While some of the upward inflationary pressures were well-anticipated, such as the 13% spike in private school fees as a result of VAT being imposed on them, rises in food prices and smaller-than-usual drops in airfares came as a surprise.&nbsp;

Services inflation, closely watched by the Bank of England, increased from 4.4% to 5%, while core inflation also rose from 3.2% to 3.7%.&nbsp;

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 ![](https://europe1.discourse-cdn.com/flex017/uploads/investengine/original/2X/2/2d6bf6e6cab1bcca9b5893a41027d31b00d0be1b.png)
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## **…causing a selloff in the FTSE…&nbsp;**

The higher than expected inflation caused the FTSE to fall over 1% over the following two days, based on worries over “higher for longer” interest rates. Despite this drop, the UK market is performing well relative to other international markets.&nbsp;

While Europe is still leading the way with gains over 9% so far this year, the UK remains up over 6%, with Emerging Markets gaining over 4%, and the US unusually lagging its regional peers, returning only 3% so far this year in sterling terms.&nbsp;

 ![](https://europe1.discourse-cdn.com/flex017/uploads/investengine/original/2X/0/008450235eddf477f475dcba857e7dd934d64f76.png)
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## **…as well as a moderating of rate cut expectations…**

Thanks to the inflation figure, markets have reduced expectations for policy easing, now pricing in a total of 0.56% in cuts by the end of 2025. This equates to just over two 25bp rate cuts, which is down from earlier, more aggressive projections of almost 3 cuts, earlier in the year.&nbsp;

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 ![](https://europe1.discourse-cdn.com/flex017/uploads/investengine/original/2X/4/4b9c3b26290bb4eb4f54569ba46894f56d4e0e20.png)
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## **…bringing the 2025 year-end implied rate to just over 4%**

Despite persistent inflationary pressure, markets are still predicting rates to edge down towards 4% by year-end, reflecting the market’s belief that the Bank of England will gradually continue on its path of rate cuts.

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 ![](https://europe1.discourse-cdn.com/flex017/uploads/investengine/original/2X/e/e43400fdb8e531b987a568cd215b92427a6b1b96.png)
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