{"id":6091,"date":"2024-02-14T09:16:26","date_gmt":"2024-02-14T09:16:26","guid":{"rendered":"\/?p=6091"},"modified":"2024-02-14T09:16:26","modified_gmt":"2024-02-14T09:16:26","slug":"us-and-uk-inflation-in-focus","status":"publish","type":"post","link":"https:\/\/hamiltoncourtfx.com\/it\/us-and-uk-inflation-in-focus\/","title":{"rendered":"US and UK Inflation in Focus"},"content":{"rendered":"
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Word(s) of the Week Wednesday<\/strong><\/h4>\n

Hawks and Doves:<\/strong> In finance, these phrases are carried over from military rhetoric, where a dove opposes military pressure and a hawk favours entry into a war. When talking about monetary policy, a dove would be in favour of softer monetary policy (lower rates) whereas a hawk would be in favour of tighter monetary policy (higher rates). The terms date back to the 18th century but was first used in juxtaposition in a 1962 account of the Kennedy administration\u2019s decision making process during the Cuban missile crisis, with the Hawks favouring an airstrike and the doves preferring a blockade of Cuba. In this instance, the Doves won.<\/h4>\n<\/div>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n\n
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US Inflation Surpasses Expectations<\/h2>\n <\/div>\n
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Inflation numbers from the US yesterday will have given the market, and the Federal Reserve, pause for thought as they came in hotter than expected.<\/p>\n

The deal between consumers and the central bank has always been \u2018we\u2019ll have to put up rates, you will suffer but then you will see inflation coming down\u2019 \u2013 which is still a tough pill to swallow after a decade or more of zero rates, but when inflation went from being \u2018transitory\u2019 and nothing to worry about to \u2018we got this wrong and rates are going to have to go up\u2019, the deal should hold that the Fed has now got this under control\u2026But yesterday\u2019s data show that housing costs, airfares, medical care and recreation all bucked the trend and led to core inflation sticking at 3.9%.<\/p>\n

The knock-on effect in the market is that the dollar strengthened, stock markets falling and further revisions to how many rate cuts we might see this yea, with now only three cuts fully priced in, down from seven when we began the year.<\/p>\n

The conundrum the Fed has is that the CPI index shows inflation way above target, but the PCE deflator (which is a wider measure) shows that inflation is well under target. In theory both of these things can\u2019t be true, but as both sets of data exist the Fed needs to weigh up both and then make their moves accordingly.<\/p>\n

There are opposite risks to the decision they will make \u2013 cut now and risk inflation rising again, which would be a huge confidence knock and if it led to rate hikes would be a massive problem. Don\u2019t cut and risk undoing the \u2018soft landing\u2019 that so far the economy has managed to deliver, turning it into a recession. At the moment these risks seem pretty even, but more data out later this week, in the form of retail sales and industrial production might well make the balance more asymmetrical.<\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n

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UK Inflation<\/h2>\n <\/div>\n
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In the UK: Inflation numbers came in at 4%, which is slightly better than expected, but still double the Bank of England\u2019s target. Earlier in the week we heard that UK wage growth had slowed to 6.1%, but that does mean that the spread between inflation and wages is 2%, so people still aren\u2019t necessarily having to make restrictive purchasing decision because wages are outpacing prices. We appreciate this is a bit of a sweeping statement and hat plenty of households will have to, but the numbers do mean that inflation risks being persistent and that interest rates, as in the states, might stay higher for longer.<\/span><\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n

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Senate Passes Foreign Aid Bill<\/h2>\n <\/div>\n
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Following months of deadlock and political back and forth, yesterday, the US Senate approved a $95bn foreign aid package. This followed 70 Senators -of which 22 were Republicans – supporting the bill while 29 opposed it. The package will still need to get through the House where it faces considerable pressure, not least from a number of House Republicans who see passing the bill as contingent on funds being mobilised for the America\u2019s southern border.<\/p>\n

The package roughly consists of $60bn earmarked for Ukraine along with $14bn for Israel, $8bn for Taiwan and Indo-Pacific partners and another $10bn for humanitarian aid. This bill constitutes a revision from the previous $118bn package which failed to make it past the Senate last week.<\/p>\n

Notwithstanding the forthcoming challenges in the House, the latest step in the package\u2019s journey through Congress will be welcome news for Kyiv who have long been calling for further support as their fiscal situation comes under increasing pressure.<\/p>\n

As we entered the new year, political pressure from Hungary\u2019s Orban and Slovakia\u2019s Fico represented particularly challenging struggle for Brussel\u2019s passing their own financial assistance package. With both Brussels and Washington failing to get further assistance to Kyiv, Zelenskyy was in the mist of a crisis. Nevertheless, earlier this month The European Union have broken a several month deadlock in pushing through a \u20ac50bn aid package for Ukraine. This package is made up of \u20ac33bn in loans and \u20ac17bn in grants (with just under \u20ac20bn of this being earmarked to pay off interest payments to the EU).<\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n

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Today in Focus<\/h2>\n <\/div>\n
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Following this morning\u2019s UK inflation print, attention will turn to the release of the latest Eurozone GDP figures for the final quarter of 2023 at 10:00. Here, the general market consensus is pointing to a quarter-on-quarter print of 0% against an annualised print of 0.1%. Following this, Governor Bailey will be speaking at 1500, as markets look for some further guidance on the BoE\u2019s monetary pathway, particularly in light of this morning\u2019s inflation print. Afterwards, 23:50 will see the release of Japanese GDP figures for Q4 2023, with the consensus forecasting a quarter-on-quarter print of 0.3%.<\/span><\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"

Word of the week Wednesday, hotter than expected US inflation, inflation data in the UK comes in double than BoE’s target, US Senate agrees foreign aid package, and today’s data. <\/p>","protected":false},"author":15,"featured_media":1956,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"rp-language":[16],"class_list":["post-6091","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-morning-updates","rp-language-en_gb"],"_links":{"self":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts\/6091","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/comments?post=6091"}],"version-history":[{"count":11,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts\/6091\/revisions"}],"predecessor-version":[{"id":6102,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts\/6091\/revisions\/6102"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/media\/1956"}],"wp:attachment":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/media?parent=6091"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/categories?post=6091"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/tags?post=6091"},{"taxonomy":"rp-language","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/rp-language?post=6091"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}