Central banks in spotlight: US rate cut and UK inflation

Our weekly market overview from Quilter Cheviot

By Richard Carter, Head of Fixed Interest Research

Market overview

Last week was dominated by the Federal Reserve meeting where the Federal Open Market Committee (FOMC) delivered their first interest rate cut of the year, lowering the Fed Funds rate by 0.25% to 4.25%. The newly-appointed Stephen Miran, one of President Trump’s economic advisors, dissented by voting for a 50bps cut. The latest rate projections – know as the ‘dot plot’ – point to further gradual reductions from here but the Fed remains somewhat caught between persistent inflation pressures and a slowing jobs market.

Elsewhere, there was little to cheer in the latest UK economic data with inflation remaining at 3.8% in August and still likely to hover close to the 4% level for another month or so. UK government borrowing figures were also once again worse than anticipated at £18bn in August and all the signs are pointing towards a difficult budget in the Autumn especially with the OBR likely to downgrade their productivity forecasts.

Markets continued to power ahead though with US indices making new highs and European bourses also rising while UK equities declined modestly. UK 10 year gilt yields edged higher partly due to the borrowing figures. Looking ahead, a number of Purchasing Managers’ Indices (PMIs) are out this week while negotiations will continue in Washington to try and avert a US government shutdown.

Quilter Cheviot Approver 23 September 2025

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