Will inflation soon peak?

This week the Bank of England and the US Federal Reserve joined the European Central Bank to complete a triumvirate of 0.75% interest rate hikes. The tone taken by the US and UK banks was noticeably different. US Fed chair Jerome Powell was keen to point out that financial markets’ expectations for interest rate are too optimistic. Positive employment figures in the US points to the job market remaining robust and so Powell was keen to emphasis that further hikes are likely to be necessary. The Fed is not for turning, or at least not yet.

In the UK, governor Andrew Bailey was a bit more conciliatory towards markets and said inflation is now expected to peak at 11% this year as he suggested that the hikes already in place may be enough to bring inflation below the 2% target in two years. The bank’s more pessimistic forecast sees inflation peak next year with more aggressive tightening required. In both scenarios the bank now predicts a prolonged period of recession but, with economic data continuing to deteriorate, this doesn’t need much crystal ball gazing at Threadneedle Street.

For the following stories, please click on this link*

• Interest Rates – US & UK central banks continue to hike aggressively
• Global – Further signs of a widespread economic slowdown
• Equities: Property under pressure from rising rates

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