When the Bank of England cut rates for the first time since 2020 earlier this month there were those who questioned whether the timing was right, the fear being the bank had moved too early.

Although headline inflation had hit the official 2% target, core inflation was 3.5% and services inflation was running at 5.7% which some considered too ‘hot’ to justify easing policy.

Last week’s economic data showed a pick-up in the headline rate of inflation from 2% to 2.2%, but this was fully expected due to energy prices falling less this year than they did a year ago.

The figure was slightly better than the consensus, which was expecting a 2.3% increase, and better than the Bank of England’s own forecast of a 2.4% increase.

Moreover, the core rate of inflation which strips out food and energy slowed from 3.5% to 3.3%, again beating the consensus forecast.

This positive data was slightly offset by stronger employment data, which showed the jobless rate for June at 3.6%, the lowest level since February 2022, although as the ONS (Office for National Statistics) itself acknowledges the data is flawed due to the low response rate to its surveys.

Meanwhile, July’s retail sales by value were strong and June’s weather-impacted sales figure was revised upward, and sales volumes were positive between May and July suggesting the UK consumer may be more resilient than thought.

Rounding out the positive picture, housing portal Rightmove (RMV) raised its forecast for UK house prices from -1% this year to +1% due to positive market trends including a marked step-up this month in the number of people contacting estate agents about homes for sale.

This week is short on data meaning most of the focus will be on the Federal Reserve’s ‘summer camp’ at Jackson Hole where among others chair Jerome Powell will be prognosticating.

Next week, which is shortened due to the UK bank holiday, interest will turn to European and US second-quarter growth figures and consumer confidence surveys for further signs of improvement. 

‹ Previous2024-08-22Next ›