The FTSE 100 kept setting records in 2026 after a 21.51% gain in 2025, while UK inflation hovered near 3% and the Bank of England held rates at 3.75%. A measured look at the numbers.
As someone who has followed the markets for years, I have learned to treat records with a mix of interest and caution. In 2026, the UK's flagship stock index gave me plenty to think about. The FTSE 100 has been setting record after record, and the story behind that run says a good deal about the current state of the British economy. It is worth examining calmly.
A run of record highs
The headline is hard to miss. After a standout 2025, in which the index rose by an impressive 21.51 percent, the FTSE 100 kept climbing into 2026. On 19 February 2026, it closed at 10,686 points, a record at the time and its second consecutive all-time high. The index has continued to push into new territory since, a run that few would have confidently predicted a couple of years ago.
Inflation cooling, then nudging up
The backdrop of prices tells a more nuanced story. UK consumer price inflation slowed to 3 percent in February 2026, raising hopes that the worst of the cost-of-living squeeze was easing. More recently, though, the headline rate ticked back up to 2.9 percent in July, from 2.6 percent in June. It is a reminder that disinflation is rarely a straight line, and that progress can stall.
The Bank of England holds
Monetary policy has been steady rather than dramatic. The Bank of England kept its key interest rate at 3.75 percent, holding rather than cutting as it weighed the mixed signals on prices. At the February meeting, Governor Andrew Bailey struck a more optimistic tone than before, and markets quickly began pricing in the possibility of a cut. For now, though, patience has been the watchword.
What is driving the market
Records do not appear from nowhere. Much of the FTSE 100's strength has come from robust corporate results and analyst upgrades, with heavyweights such as Rolls-Royce and BAE Systems among the standout performers. Because the index is weighted toward large, globally focused companies, its rise reflects international demand as much as the domestic economy. That distinction matters when interpreting the numbers.
My measured take
For all the excitement, I try to keep perspective. A record index level is a milestone, not a guarantee, and markets can reverse as quickly as they climb. What reassures me more than the headline number is the combination of steadier inflation and disciplined policy. The real test will be whether this strength endures once the current tailwinds fade, as they eventually will.
Great coverage of inflation.
Good context around inflation.
Really useful piece on inflation.