A significant week for financial markets, with the Fed, Bank of England and European Central Bank all raising rates by 0.50%. Further hikes in the coming months are likely as inflation remains uncomfortably high, however, we should see rates peaking mid-2023 as the focus switches to recession. Potentially, we may see interest rate cuts later next year to stimulate growth.

The UK central bank vote was split three ways, highlighting the challenges ahead, with rates now at a 14-year high.

UK inflation dropped to 10.7%, adding to hopes that last month’s 41-year high was the peak. The jobs market remains robust, but with average earnings rising 6.1% and inflation likely to remain above 10% in the coming months, the squeeze on disposable income continues.

Critically important US inflation slowed by more than expected to 7.1%, reinforcing the view that we have now seen the peak, and the Fed will slow policy tightening.