Making sense of this crazy world
This week we have seen the US and Japan follow Europe in raising interest rates. Only the UK has kept rates on hold.
Bond yields have been a real concern as inflation has reared its head again. Yields, however, fell on Thursday as the Bank of England (BoE) reported that it was pausing all its bond sales. UK equity markets responded positively.
Many economists have the view that inflation is likely to be more persistent due to developed nations having to navigate lots of elements outside of their control.
Oil prices have fallen over the last three days, with Brent Crude falling so far today by 2%. Concerns have eased over Saudi supply disruptions.
Yesterday, US stocks rallied, which carried into Asian markets spurred by the falling oil price and optimism that inflation will be contained.
Finally, we dive into Goldman Sachs’ views on bond yields and equities.
This week’s content:
- UK interest rates remain on hold
- Gilts rally as Bank of England pauses bond sales
- US interest rates follow the global trend
- Canada to become part of Europe?
- Saudi Arabia finds an alternative way
- International inflows into US equities exceed government debt for first time in a century
- Can the S&P500 rally as Treasury yields rise?
- Conclusion
UK interest rates remain on hold
The Bank of England’s Monetary Policy Committee (MPC) voted to hold interest rates at 3.75% for the sixth successive meeting this week.
Six MPC members opted to hold rates, with three members voting to hike rates by 0.25% to 4% (source: Investment Week).
The MPC members said: “There has been little evidence so far of material second-round effects in price and wage-setting. However, the risk of such effects, against which policy needs to lean, is greater the longer higher energy prices persist or are more volatile”.
BoE governor Andrew Bailey, who also chairs the MPC, had previously warned the House of Commons Treasury Select Committee that inflation and energy price risks were “on the upside”.
A flurry of economic data earlier in the week proved his point, with inflation rising to 3.1% in August after a renewed spike in energy prices, while early estimates indicated the number of payrolled employees had fallen by 145,000, or 0.5%, in August 2026 compared to figures from August 2025.
Continues…
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