Last week Bank Of England and European Central Bank held their interest rate meetings. Even if the outcome was the same, leaving it unchanged. We could see different approaches going forward. BoE members were undecided on rates, and 3 out of 9 members did want the base rate to increase up to 5.5%. Hawkish outlook, at least if we compare versus the Federal Reserve that will start to cut rates in 2024.
Driving factors for market movements will be announcements from Central Banks going forward. We can see that inflation levels is coming down closer to its target rate of 2%, for the US and Europe. For the UK, its not dropping at the same pace and markets suggest inflation figures are more ‘stickier’. With the UK being a servicing country, majority of goods are imported – inflation is passed on.
In terms of data that will be of importance this week is core inflation and inflation rate for Europe (Tuesday) and UK (Wednesday). Follow by core Personal Consumption Expenditure on Thursday for the US. PCE is the preferred measuring tool for the Federal Reserve, and from their announcements last week of upcoming rate cuts – markets could overreact if these numbers come in far off from its expectation of 3.4%.