Inflation was stronger than expected in September. A 0.5 percent monthly rise in prices was a tick higher than the market consensus and large enough to hold the annual inflation rate steady at August's 6.7 percent. This was still some 4.4 percentage points below last October's 11.1 percent peak but also fully 4.7 percentage points above the BoE's medium-term target. The yearly rate matches its lowest mark since February 2022.

However, core prices were slightly better behaved with a 0.5 percent monthly gain that trimmed the annual underlying rate from 6.2 percent to 6.1 percent, its weakest print since January.

The main downward contribution to the change in the annual headline rate again came from food and non-alcoholic drink where prices fell 0.2 percent on the month, their first drop since September 2021, versus a 1.1 percent spike in in the same period in 2022. Furniture and household goods (0.1 percent after 1.5 percent) also had a sizeable negative impact. However, there were offsetting rises in alcohol and tobacco (0.9 percent after 0.4 percent), education (1.8 percent after 0.8 percent) and restaurants and hotels (0.8 percent after 0.6 percent). Overall goods inflation dipped from 6.3 percent to 6.1 percent but the rate in services edged up from 6.8 percent to 6.9 percent.

Today's CPI update will probably not go down well with the BoE MPC's hawks. The deceleration in the core rate will be welcome but the uptick in services will be a worry and the flat headline rate leaves an unacceptably large overshoot versus the 2 percent target. November's vote could again be very close. The September data put UK's RPI at exactly zero but with the RPI-P at minus 27, real economic activity is falling quite well short of forecasts.

At a 6.7 percent annual rate in August, inflation was lower than expected but still only one tick down from the July print. September's expectations are 6.5 percent.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in the UK. It is calculated using the same methodology developed by Eurostat, the European Union's statistical agency, for its harmonised index of consumer prices (HICP). The CPI is the Bank of England's target inflation measure.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as the UK, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. Inflation is an increase in the overall price level of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

For monetary policy, the Bank of England generally follows the annual change in the consumer price index which is calculated using the European Union's Eurostat methodology so that inflation can be compared across EU member states.