19th February 2025
UK Inflation Rebound Intensifies Pressure on Bank of England's Rate Cut Plans
In January, the UK annual inflation rate rose to 3.0%, surpassing market expectations of 2.8% and up from 2.5% in December. The increase was driven by higher private school fees, following the introduction of a new sales tax, along with rising transport and food costs. Higher inflation makes a March interest rate cut by the Bank of England improbable, with figures confirming a rebound as rising air fares and the introduction of VAT on private school fees widened the gap with the Bank’s 2% target. Core inflation, excluding volatile items, climbed to 3.7% from 3.2%, adding complexity to the Bank’s monetary policy outlook and potentially delaying rate cuts.
12th February 2025
US inflation surprises to the upside in January
Inflation in the US unexpectedly rose in January to 3%. This underscores the challenges facing the world’s largest economy in controlling their rate of inflation whilst trying to lower interest rates to stimulate the economy. Interestingly, a lot of this rise can be attributed to the price of eggs alone which rose 15% off the back of the recent avian flu outbreak. Regardless of the driver, the rate was higher and as such stocks and bonds suffered in the wake of the announcement as investors reduced the probability of the US cutting rates again in 2025.
7th February 2025
U.S. jobs growth comes in weak
The U.S. Bureau of Labor Statistics reported that the economy added 143,000 jobs in January, below the anticipated 170,000. This marks a slowdown from December's revised gain of 307,000 jobs. Despite the deceleration, the unemployment rate decreased to 4.0%, the lowest since May. Revisions to previous months' data added 100,000 jobs to prior estimates, which softened the blow of the weak January number. Major U.S. stock indices declined, with the S&P 500 decreasing by 0.9%, and the Nasdaq Composite dropping by 1.4%. These declines were attributed to the lower-than-expected job additions and a decrease in consumer sentiment.
6th February 2025
Bank of England cuts interest rates by another 0.25%
The UK's Bank of England has cut its interest rate by another 0.25% to 4.5%. The BoE cites mounting concern around the UK's growth trajectory with this now being cut to 0.75% down from 1.5% which was only made in November 2024. Interestingly the BoE also said it predicted short term inflation to rise once again before it fell, stoking concerns around stagflation taking hold in the UK. As rates fell the pound weakened which inversely boosted the value of he FTSE 100 with its international focused businesses to a record high. All eyes will now be on the UK's first quarter growth for the next update on the state of UK growth and for a hint as to where interest rates will go next.
15th January 2025
US Inflation Eases in December; Markets React Positively
In December, the U.S. annual inflation rate came in at 2.9%, slightly above the market estimate of 2.8%, rising from 2.7% in November. The increase was driven primarily by higher energy costs, with gasoline prices climbing 4.4%. Core inflation, which excludes food and energy, edged down to 3.2%, slightly below expectations of 3.3%, and down from 3.3% the previous month. Bond markets rallied on lower-than-expected core inflation figures with 10-year treasury yields falling to 4.7% from 4.8%, whilst U.S. equity markets opened higher following a weak start to the trading week. The recent market moves reflect growing investor optimism, without dashing hopes that the Federal Reserve will be able to cut interest rates in 2025.
15th January 2025
UK Inflation Eases, However Core Pressures Persist
UK inflation eased to 2.5% in December, down slightly from 2.6% in November, as energy and transport costs continued to decline. However, core inflation held firm at 2.7%, reflecting persistent pressures in services and wage growth. The Bank of England is expected to adopt a cautious stance, with policymakers balancing moderating headline inflation against underlying risks that remain above the 2% target. Despite cooling from last year’s peaks, structural price drivers and business cost pressures pose challenges to sustained disinflation. The pound edged 0.1% lower to $1.26 following the release, as markets weighed the potential for a slower shift in monetary policy.
10th January 2025
US posts another blockbuster jobs number for December
The US economy posted another blowout jobs number in December with 256,000 jobs created. This was well above the markets estimates of 165,000 and evidences just how strong the US continues to be. The market sold off on the news primarily because a strong economy with a strong labour market does not need interest rate cuts to which the market is very keen to see keep coming down.