Three central banks and a Budget in three days

Hello,

Welcome to the first Sunday note from How the World Works: the week’s essential stories, the mechanics behind them, and what to watch next. Five minutes, every Sunday.

The week in five stories

1. Oil hits a six-month high. Brent closed at $116.72 a barrel on Friday, up about 76% in a year, as the Strait of Hormuz stays blocked. It’s feeding into inflation across every oil-importing economy.
howtheworldworks.news/news/brent-six-month-high

2. UK inflation jumps to 3.5%, and the rise is spreading. Core inflation rose too, a sign the pressure is moving beyond fuel. Markets now expect the Bank of England’s first rate rise since 2023, on 5 November.
howtheworldworks.news/news/uk-inflation-september-2026

3. Japan’s inflation is back above 2%, and it’s homegrown. Without fresh food and energy, prices rose 2.4%, driven by services that track wages. That’s the kind of inflation central banks act on.
howtheworldworks.news/news/japan-core-inflation-above-target

4. Europe slows as energy costs bite. Euro area business activity hit a four-month low while factory costs rose at their fastest since May: an oil shock hits prices first and growth later.
howtheworldworks.news/news/euro-zone-growth-slows-energy-costs

5. Investors rush into bonds after a tech sell-off. The US 10-year yield had its biggest one-day fall in over two years on 22 October, to below 5%, after touching 5.3% earlier in the month. Fear can move yields as much as inflation.
howtheworldworks.news/news/flight-to-safety-bond-yields

The mechanism of the week: r − g

Japan owes about twice its GDP, yet it isn’t in a debt crisis. The reason is two numbers: r, the average interest rate a government pays on its debt, and g, how fast its economy grows in money terms. When r is below g, debt shrinks relative to the economy on its own. Japan pays almost nothing on its debt today, but its 10-year yield is now close to 3%. As old bonds are replaced, the gap closes. The same arithmetic sits behind the budget fights in France, the UK and the US.
howtheworldworks.news/mechanics/debt-dynamics

The numbers

• Brent crude: $116.72 a barrel (23 Oct)
• US 10-year yield: 4.96% (22 Oct)
• Euro area inflation: 3.8% (September)
• UK inflation: 3.5% (September)
• Yen: about 158 per dollar

What to watch this week

• Wed 28 Oct: the UK Budget. Gilt yields are near their highest since 2008, so bond investors will judge the plan closely.
• Wed 28 Oct: the Federal Reserve. A hold at 3.75–4.00% is expected.
• Thu 29 Oct: US growth and PCE inflation, then the ECB, which is expected to hold at 2.50%.
• Fri 30 Oct: Tokyo inflation, the Bank of Japan (a hold at 1.25% is expected), and euro area growth.

The full week ahead, with why each one matters:
howtheworldworks.news/week

Did you follow the week?

Five questions, two minutes:
howtheworldworks.news/quiz/2026-10-25

That’s it for this week. If this was useful, forward it to a friend, and follow us on Instagram for a short explainer every day: www.instagram.com/howtheworldworks.news/

See you next Sunday,
How the World Works

Educational content only, not investment advice.