DIVERGNCE IN INFLATION DRIVERS BETWEEN THE UK AND US PRESENTS A DIFFERENT SET OF PROBLEMS
This week the UK continued to scorch in hot weather which resulted in drought warnings and hosepipe bans. The UK economy cooled and reported the first quarterly fall in growth for a year contracting 0.1% for the second quarter.
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BLEAK OUTLOOK FROM THE BANK OF ENGLAND INCREASES PROBLEMS FOR NEXT PM
This week we heard the Bank of England forecast a deep recession, runaway inflation and the standard of living being eroded at an alarming rate. In January the bank was predicting inflation of more than 6% and saying gradual interest rate rises would be able tame inflation and sidestep a recession.
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US FED RATE HIKE SEES EQUITIES AND GOVERNMENT BONDS RALLY AS OUTLOOK DETERIORATES
This week we saw the US enter a recession that is not yet a recession. US GDP unexpectedly shrank in the second quarter by 0.9%, after falling 1.6% in the first three months of the year.
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INFLATION TAKES CENTRE STAGE ONCE MORE AS TORY LEADERSHIP RACE ENTERS THE FINAL LEG
This week the main story in markets has been inflation as the European Central Bank increased interest rates for the first time in 11 years and CPI in the UK rose again.
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BOND MARKETS REMAIN CALM DESPITE SPECULATION THE US FED MAY HIKE BY 1%
This week we saw US CPI exceed expectations (again) while there was a surprise increase in UK GDP in May. The US Fed will be concerned that inflation is not confined to areas such as food and energy but it may take some comfort from the continued decline in commodity prices.
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OND MARKETS REMAIN UNCONVINCED BY CENTRAL BANKS’ DECLARATION OF THE END OF LOW RATES
This week we learned that the end is nigh, or at least the era of rock bottom interest rates and sub-2% inflation is apparently at an end.
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Summer Outlook
The performance of financial markets continued to be driven by rising inflation and rising central bank interest rates, but the rate of both has added the fear of recession to the mix.
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CENTRAL BANKS HAVE LITTLE ROOM FOR ERROR AS THEY ATTEMPT TO CURB INFLATION
This week inflation continued to grind higher, with price rises heaping more pressure on the embattled British consumer. Unsurprisingly confidence has dropped to record lows, a bad sign for a nation dependent on consumer spending for growth.
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CENTRAL BANKS HIT THE BRAKES AS THEY RAMP UP EFFORTS TO TACKLE INFLATION
This week has been a busy one for central banks with the Bank of England and Bank of Japan going against the grain and opting for a less dramatic approach than the central banks of the US, Europe and Switzerland.
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CENTRAL BANKS ARE HOPING A COOLING PROPERTY MARKET WILL HELP TACKLE INFLATION
This week saw further evidence that the global housing market is beginning to cool. New mortgage approvals and home completions are falling in the US.
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