It has been another hugely volatile week across global markets with the extremely challenging economic outlook and high level of uncertainty. The unprecedented action by the Bank of England last week has brought some calm to UK assets, and the Tory party conference passed without incident.
Markets fully expect the Bank of England to increase rates by 1% next month, and for rates to peak around 5.50% next year. The chancellor will announce his much-anticipated medium term fiscal plans on November 23rd, with much focus on what the OBR’s assessment of their economic impact will be.
In the US, Fed officials have continued to be hawkish, with markets looking for another 0.75% hike next month as they continue the cycle of aggressive monetary policy tightening.
Whilst in Europe, the energy crisis will likely remain a drag on the Euro and continue to add to inflationary pressures. Despite this, the European Central Bank are still fully expected to raise rates by 0.75% later this month, with rates expected to hit 2% by year end.
Recession remains a real threat globally with central banks focussing primarily on taming inflation.
Volatility has increased across commodity markets with OPEC cutting production, leading to higher oil prices which further stokes the global inflation problems.