This week, we evaluate what the future holds for economies and markets over the next 10 years, as interest rates and inflation are expected to be higher than in the previous decade.
The Bank of England (BoE) kept interest rates on hold yesterday and many experts now believe we have arrived at the summit of the interest rate peak. The question now, is will interest rates fall in the image of the Matterhorn or will they fall more like the formation of an escarpment?
I must apologise here; it’s the ex-geography teacher in me! Those who paid attention in school will know what I’m talking about. If you weren’t, then an escarpment is a ridge which has a steep scarp on one side and a gentle slope on the other.
Here is this week’s agenda:
- At last, a pause!
- UK inflation surprises analysts
- Consumer confidence improves
- UK public borrowing lower than forecasts
- The Matterhorn or an escarpment?
- Monetary policy uncertainty has caused volatility
- What do the next 10 years hold for your investments?
- What is the government up to with its climate change pledges?
At last, a pause!
It was a close-run thing as the Monetary Policy Committee (MPC) voted to keep rates on hold. The votes unfolded in a five to four split in favour of not increasing rates, with the casting vote coming from the Governor of the BoE.
This followed better-than-expected inflation data. The pausing of interest rates was significant because it was the first pause following fourteen consecutive rate rises since December 2021. However, as always, there was a caveat…“Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term.” Good news though for those with a mortgage and businesses with heavy borrowings.
The Federal Reserve also paused interest rates this week.
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Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.