BoE to cut rates as inflation drops. Will this boost FTSE 100?

UK inflation readings today show October CPI dropped to 3.6 percent. (CPIH was 3.8%)

This figure, whilst still above the central bank’s 2 percent target, may bring a dose of relief to the Treasury. Chances of a rate cut next month are now quite likely.

25 basis points is the estimated cut in the Base Rate.

Lower borrowing costs are always good for indebted entities (such as the UK government) and mortgagers. This exerts less financial pressure on the balance sheets.

Still, UK’s 10-year gilt yield is not falling much. At 4.6 percent, the rate sits very near its cyclical high. A further increase from here is not to be ruled out unless it drops below the range floor at 3.8-4.0 percent.

Turning to UK equities, I note the blue chip index – FTSE 100 – is now resting near its uptrend support (50-day moving average). I use “ISF” as the ETF proxy for the index.

The index has been rising non-stop since late 2024. The shocking Trump Tariff back in April only dented FTSE 100’s bull trend for a couple of weeks before it resumed steadily upwards.

Part of Footsie’s strength was driven by financials such as banks and insurance. Barclays (BARC), for example, was up 55 percent in a year.

Going forward, will the large-cap index stay positive into 2026?

Yesterday, I observed some weakness in US AI stocks. A swift collapse of the AI bubble will harm all equity bull trends given the weight of the tech sector. Nvidia (NVDA) along is worth $4.5 trillion.

Therefore, FTSE 100 is anticipated to trade cautiously around this level until the choppiness in the AI is resolved. The range to watch for is 900-950p; and watch to nibble some at the lower side.