City braces for fresh inflation and borrowing figures 

The City is bracing for another busy week of new data illustrating the health of the UK economy.

Last week, the FTSE 100 index fell 1.89 per cent to finish at 6,858.79 points after it was rocked by prime minister Liz Truss ditching chancellor Kwasi Kwarteng.

The domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, lost a similar amount last week to close at 17,032.82 points.

Fresh inflation data out on Wednesday is likely to reveal prices are still rising rapidly, with the City expecting the headline rate to climb from 9.9 per cent to 10 per cent, five times the Bank of England’s two per cent target.

But, analysts said there is an outside chance inflation held steady over the last month.

“Falling pump prices, alongside travel and accommodation prices (post summer) could end up keeping the annual CPI rate flat in September,” Sanjay Raja, senior economist at Deutsche Bank, said.

New public finances figures out on Friday will be picked through for signs of the scale of the challenge facing new chancellor Jeremy Hunt to reduce the UK’s debt pile.

Hunt has already tried to calm markets by insisting taxes will have to rise and government spending will grow slower than expected.

Figures out on Friday are expected to show retail sales fall four per cent, highlighting consumers are responding to red hot inflation by cutting consumption.

Monday could also bring new volatility to the UK debt market. It is the first trading day since the end of the Bank of England’s £65bn emergency bond buying scheme.

Last week, yields on UK gilts, which move inversely to prices, shot higher despite Truss reversing plans to keep corporation tax at 19 per cent.