Written by Millan Chauhan.
Last week, we saw the release of further economic data which included US Producer Price Inflation (PPI) which surprised to the upside, coming in at 7.4% on a year-on-year basis with expectations at 7.2%. The US market did not react well to this data release and, as markets had estimated, there was a much faster slowdown in inflation. This saw the S&P 500 Index close down -4.0% in GBP terms last week. Markets are now looking towards the next Federal Open Market Committee meeting which is set to take place on Tuesday and Wednesday of this week, where we will learn the Fed’s decision on how aggressively it will increase rates in the US. Since June 2022, the Federal Reserve has forcefully hiked up rates in an attempt to slow down inflation which has seen rates climb to 4.0%. The expectation is that the Fed will begin curbing these hikes with a 50 basis point increase expected on Wednesday.
In the UK, house prices have fallen for the third month in a row which is also the fastest pace at which they have fallen since the housing crash of 2008. This has been caused by buyers being put off by higher monthly mortgage payments which have surged following a string of interest rate rises by the Bank of England. Halifax announced that average house prices declined by -2.3% between October and November which is the highest monthly price drop for 14 years. The Bank of England is set to announce its interest rate decision on Thursday and expectations are that we are likely to see a 50 basis point increase to move interest rates to 3.5%.
We will be taking a break from penning The World In A Week and will return on 3rd January 2023. We wish you all a Merry Christmas and a Happy New Year.
