This week brought another twist in the gradually evolving story of inflation. In the US – which up to now has seen the most rapid decline – inflation fell only slightly as both CPI and core failed to match expectations. In contrast, the UK has seen inflation decline only modestly in recent months, but January brought a much faster reduction than expected. As usual, this generated a lot of speculation that the Federal Reserve and Bank of England will deviate from the trajectories that markets have mapped out for their interest rates.
What has been interesting this week is the release of supporting information. The US is a consumer driven economy and resilient inflation has been accompanied by very strong retail spending in January. In the UK, inflation may have fallen for the third month but CPI remains above 10%, and jobs data points to a tight labour market with wages rising steadily. Inflation does appear to be past its peak but the path to getting inflation back to target is unlikely to run smoothly and we are likely to see further volatility as markets are forced to readjust.
Read what the team at Financial Express consider to be significant over the current week.