Undershooting inflation, Interest rate debates, Energy price hikes, COP26
Discover key economic and financial metrics, and what to look out for in the week ahead.
2 minutes to read
UK inflation lower than expected but markets price in a reversal of the emergency rate cut
UK CPI inflation for September undershot expectations, coming in slightly lower than last month at 3.1%. However, markets have been pricing in a base rate increase as soon as next month. This comes as the new Bank of England (BoE) Chief Economist announced that inflation could reach or exceed 5% early next year. Expectations of a rate increase have since moderated slightly following the announcement yesterday by another BoE rate-setter that more information is needed before action is taken. Nevertheless, markets are pricing in a reversal of the emergency rate cut sooner than previously anticipated. The next BoE interest rate decision will be on 4th November.
Oil prices top multi-year highs
Brent Crude has increased to the highest rate since October 2018 at above $86/barrel, while West Texas Intermediate has seen trading at the highest price per barrel since 2014. Although the Baltic Dry Index, a measure of shipping costs for raw materials has declined by approximately 25% from its early October peak, it also remains well over 200% higher than the start of the year. These elevated prices are expected to support cost-push inflation over the coming months.
The week ahead; Budget, Spending Review and COP26
This Wednesday’s Budget and Spending Review will provide further guidance on the fiscal direction of travel and ongoing economic recovery in England and the wider UK. We are likely to see further detail on ‘levelling up’, R&D spending, as well as a lift in the national living wage, amongst others, all of which are notable for real estate. COP26 will also begin in Glasgow on Sunday. This will be the first UN Convention on Climate Change to have a dedicated day to focus on cities, regions and the built environment and many will be on the lookout for further green announcements as a result.
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