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In our Market Insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
UK inflation expected to fall to 6.5% in September
Headline inflation eased again in September, official figures are expected to show this week, while pay growth is slowing across the UK.
Economists polled by multiple firms expect the ONS to report annual inflation will have fallen slightly to 6.5% in September from 6.7% in August. However, that is still well above the Bank of England’s 2% target which they continue to aim for.
A steeper fall in prices growth was likely until oil prices jumped, with the cost of a barrel of Brent crude up $10 over the month to a peak of $97 at the end of September. It has since fallen back to $90.
Motorists in the south-east have seen petrol prices at the pumps rise above £1.56 a litre and the cost of a litre of diesel increase to £1.60, according to latest figures from the AA motoring group.
The jobs market has also weakened in tandem with this, increasing unemployment and reducing the need for employers to keep pushing wage bills higher as a result.
The ONS published last month that total earnings (including bonuses) in the three months to July 2023 were 8.5% higher than in the same period a year earlier – the highest since modern records began in 2001 other than during the midst of the Covid-19 pandemic.
Most analysts said the exceptional increase in average incomes – boosted by bonuses to NHS workers – most likely weakened in August to 8.3% or lower.
Earnings growth without bonuses is expected to be unchanged at 7.8% in the three months to August compared with a year earlier.
Higher fuel costs drive consumer prices higher across the US
Consumer prices continued to rise in the US across the month of September fuelled by higher housing and petrol costs, in the latest published figures.
Inflation was 3.7% over the 12 months to September, which is the same rate that was recorded for August. The US central bank is now heavily debating whether it will need to raise interest rates again to stabilise price growth across the nation.
While inflation has cooled significantly from last year, it remains higher than the 2% target. Alongside this, the annual figure held steady between August and September, with inflation cooling from 0.6% to 0.4%.
The increase in housing was the biggest contributor to the increase in the Consumer Price Index, which is the collection of goods and services that the Labor Department uses to measure price increases.
Petrol prices also continued to climb, although at a slower rate than previously. However, prices for used cars and clothing fell month-on-month while the increase in grocery prices slowed.
The Federal Reserve has already raised borrowing costs sharply and its key interest rate now stands at more than 5.25%, up from near-zero in March 2022.
The rise has hit the general public in a number of areas such as sharply higher mortgage rates and more expensive business loans.
The Federal Reserve is now hoping that the higher rates will encourage saving and reduce business expansion and other activity to cool the economy therefore and ease price pressures. But while inflation has cooled significantly from more than 9% last year, it remains higher than the Fed's target.
Officials have recently warned that they expect rates to remain relatively high for some time, in part because job growth and spending has held up far better than expected.
But they have grown increasingly hopeful they will be able to subdue inflation without triggering a severe downturn in the process.
