BOE's new inflation gauge stays tame as rate decision nears

How the sticky-central gauge works

The BOE's sticky-central measure is built to track underlying pressure by assigning more weight to prices that do not change often and to components central to production. In July, the BOE noted that headline inflation was being "driven mainly by price changes in more flexible and less central sectors, rather than by sticky and central prices."

Energy has a smaller footprint here than in the consumer price index, but the measure still captures indirect energy effects as they flow into energy-reliant categories like new automobiles and road-based transportation. Within this setup, items such as eateries and coffee shops, new cars, and recreation and sporting services are assigned larger weights.

What the latest reading says

Based on official CPI data, September's sticky-central print was 3.3%, a level it has hovered around for much of the time since the Iran war began. The last time it dipped beneath that mark was in 2021, ahead of Russia's invasion of Ukraine that sent energy prices sharply higher. Over the same span, headline inflation has increased by 0.5 percentage point this year to 3.5%.

Even with a worsening energy shock and a surprisingly resilient UK economy stoking concern about inflation, the BOE-watched gauge is not signaling a broad buildup.

Long term investors benefit from learning new tools that reveal durable market trends. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

How policymakers and economists are reading it

The BOE may reference the sticky-central metric in Thursday's report. While many expect the first rate rise in more than three years, a dovish minority is likely to argue for leaving Bank Rate at 3.75%, citing that companies still struggle to raise prices.

Barclays' Jack Meaning, the bank's chief UK economist, called the measure a "reassuring signal," but warned that recent gains in oil and gas keep risks alive. "So far, this new metric is showing limited signs of persistent price pressures coming down the track," he said, noting it sits just above its pre-2020 average, below last year's level, and well below its level once the Russia-Ukraine conflict began. Rob Wood, Pantheon Macroeconomics' chief UK economist, cautioned that it remains higher than would align with the BOE's 2% target.

Officials are also considering whether the energy shock will trigger second-round effects similar to those following the Ukraine war. A portion of the committee argues soft labor demand will limit wage bargaining, while others worry that solid GDP growth and a steadier jobs market are raising inflation risks.

Why it matters for your portfolio

In plain English: a steady sticky-central reading suggests underlying pressures have not accelerated even as headline inflation has ticked up, and it could shape how the BOE frames persistence at this week's meeting. The policy debate remains live - most leaning toward a hike, with a minority for a hold at 3.75% - and this measure is one lens they are watching to judge how durable inflation might be.

Being curious about emerging insights helps investors find an informed edge over time. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.