Written by Shane Balkham
Last week’s UK inflation print was encouraging. The headline Consumer Price Index, which measures inflation, fell to 3.0% year-over-year in January, down from 3.4%, helped by a meaningful slowdown in food prices. Producer Price Inflation, which measures changes in prices charged by businesses before goods reach consumers, also showed strong evidence of cooling, strongly supporting the Bank of England’s view, as published in its Monetary Policy report, that inflation is expected to move closer to 2% over the next couple of months. At the same time, the labour market is cooling. Pay growth slowed, and the unemployment rate edged higher last week, signalling that labour demand has softened. Taken together, the case for rate cuts in the UK has strengthened, with markets now pricing a significant chance of a cut at the next meeting on 19th March.
Moving across to the US, the Federal Reserve published its minutes from the last meeting, which unveiled a full range of opinions on the future direction of US interest rates, with cuts, a long pause, and even rate increases discussed. The overall impression gained from the minutes does suggest rate cuts are on the table, but an immediate easing does seem unlikely.
Uncertainty around the path of US rates was followed by increased uncertainty over US trade policy. The Supreme Court ruling against the International Emergency Economic Powers Act (IEEPA) tariffs was not unexpected. What was less predictable was President Trump imposing a 10% universal tariff, then raising it to 15%.
The Supreme Court ruling invalidates just over half of the tariffs imposed by President Trump since returning to office last year. The Supreme Court did not determine if, or under what circumstances, refunds of tariffs might be due to companies that paid them. That decision will be left to a lower court to determine, as it relates to about $175 billion of tariffs paid to date.
It is unlikely that tariffs will permanently return to lower levels. Instead, it is expected that the Trump administration will invoke other legal statutes that allow the President to impose a tariff of up to 15% for as long as 150 days without Congressional approval against countries with “larger and serious” trade imbalances.
As we have already experienced with reactionary announcements such as these, details are limited. Information around already agreed tariffs around the North American Free Trade Agreement (NAFTA), which involves Mexico and Canada, as well as lower tariff agreements with countries such as the UK have yet to be announced.
However, the initial positive of the Supreme Court ruling is that President Trump will have less discretion to impose tariffs going forward and will have to follow a legal process to put future tariffs in place.
This year has continued to demonstrate the importance of being appropriately diversified over the long-term to deliver strong outcomes for our clients, particularly during periods of market stress. Having differentiated returns from various geographical areas and asset classes, such as those mentioned in this update, is an antidote to the short-term market uncertainty and geopolitics.
All performance figures are stated in Sterling terms, unless otherwise specified.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 23rd February 2026.
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