A week filled with inflation data from nations in Europe, was summarised yesterday when we saw core inflation, excluding food and energy, data from EU.
It rose to 5.6% in comparison to market expectations of 5.3%. This is evidence that an increase in energy prices has affected other areas and contributing to increased price levels across all sectors.
Yesterday afternoon we saw continuing and initial jobless claims for US that keeps proving strong figures. In the last month, very healthy job figures have carried strength to the USD, confirming that the Federal Reserve’s interest rate hikes isn’t diminishing the US economy.
Markets are pricing in a greater probability of an increased target rate for the Fed between 5.5-5.75%. That would require an additional 100 basis points from where they’re standing right now,
In the UK, the economic calendar is unusually quiet this week. This put BoE speak in the spotlight, with the highlight being a speech from BoE Governor Bailey on Wednesday. Bailey didn’t offer much, saying that “nothing is decided” with regard to further rate hikes and that incoming data, particularly inflation, would determine the BoE’s rate decisions.
Still, there was a slight hint that more rate hikes are coming, with Bailey warning that “if we do too little with interest rates now, we will only have to do more later on”. The BoE’s battle with inflation is far from over, as inflation is at a red-hot 10.1%, despite the Bank’s aggressive tightening which has raised the cash rate to 4.25%. The markets are expecting more tightening and have fully priced in 0.25% hikes at the March 23rd and May 11th meetings.