Although considerably paired down from President Biden’s initial spending plan of $2.3 trillion, a proposed infrastructure deal of $579 billion was agreed with senators. It will focus on improving and building roads, bridges, railways, public transport, and broadband networks. This is all new spending and, when combined with the renewal of existing annual funding for infrastructure, the total commitment over the next eight years is $1.2 trillion.
This pushed US stocks to another record high by the end of last week with the strongest weekly performance since February. This was despite consumer inflation in the US hitting 3.4% for the past 12 months to the end of May. The rise in inflation was slightly below expectations and does marginally ease the pressure on the Federal Reserve’s outlook for interest rates, having surprised investors with their slightly more aggressive tone two weeks ago.
Unlike their counterparts across the Atlantic, the Bank of England delivered a modestly subdued report for their Monetary Policy Committee meeting last week. Commenting on the recent measures of inflation being stronger than expected, the Committee anticipates this to be transitory in nature and not develop into a factor that will cause a tightening in their monetary policy.
The balancing act for all policymakers around the world is to build a bridge, from the emergency conditions that were put in place last year, to more normalised conditions, without triggering a repeat of 2013’s taper tantrum.
Finally, last week marked the fifth anniversary of the Brexit referendum. Having only just left the trading agreement with the European Union at the end of January this year, and with the muddling effects of the pandemic, it is still too early to judge whether the UK is in a better or worse position. Public opinion has remained constant, with very few Britons having changed their view of Brexit over the past half decade, leaving the pro- and anti- Brexit camps closely matched. What is clearer though is the need for the Government to rebuild relationships with our trading partners around the globe, as well as with the UK electorate.
