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.

The Bank of England made an emergency intervention to calm markets following a week of real turmoil across all asset classes. The central bank will initially buy government bonds up to a value of £65bn and vowed to do more if necessary. They have also postponed their planned unwinding of QE. The bank is fully expected to raise interest rates considerably in the coming months, with the market pricing in a Bank rate of 6% next year.

The next meeting is scheduled for November 3rd, but an emergency meeting and substantial rate hike before then remains entirely possible if we see further market dysfunction.

UK growth figures this morning were better than expected, showing the economy grew by 0.2% in the last quarter, and 4.4% year-on-year.

In the US, Fed officials continue to be hawkish, and the central bank remains set to continue its aggressive cycle of rate hikes to bring down inflation, at the risk of potentially pushing the economy into recession.

The European Central Bank are also fully expected to raise rates again next month, potentially by another 0.75%, despite huge concerns over gas supplies, and the added uncertainty in Italian politics.

On the exchanges markets remain extremely volatile, with sterling dropping to an historic low of 1.0350 against the dollar, before recovering towards the 1.1200 level following the Bank of England intervention. GBP/EUR continues to see demand below 1.1000 and has pushed back up to 1.1300.

The Bank of England raised interest rates by 0.50% yesterday, taking the Bank of England base rate to 2.25%, its highest level since 2008. Further hikes are expected in the coming months with analysts now forecasting a peak of 4.80% next year.

The vote was split, with some members arguing for an even bigger move yesterday.

The Bank will also start to unwind its Quantitative Easing (QE) program next month, despite acknowledging the economy may already be in a technical recession.

Recent economic data has highlighted the extent of the challenges facing the central bank as they balance high inflation and a tight job market, against slowing retail sales and an ongoing squeeze on household budgets.

Today the focus turns to the government fiscal policy as the chancellor lays out plans to support and grow the economy. However, there are concerns over the fiscal credibility of how this will be funded, with government debt levels already uncomfortably high.

In the US, the Fed raised interest rates by a further 0.75% as they continue their path of aggressive policy tightening, raising the expected peak in rates to 4.60% next year as they fight to bring down stubbornly high inflation.

The European Central Bank are also set to continue their cycle of forceful rate hikes despite the grim economic outlook and the huge concerns over gas supplies and risks of a further escalation of the war.

The UK jobs market remains robust, with wages rising 5.5% and unemployment down to 3.6%, its lowest level since 1974. However, with inflation sticking around 10%, the squeeze on disposable incomes continues to weigh on the economy. The government will deliver a mini-budget next Friday.

The Bank of England meet next Thursday, with the market favouring a 0.50% hike, though there is a real possibility of 0.75%. Further rate increases are expected in the months ahead, with the peak now expected to hit 4.40% mid-2023.

US inflation came in at a higher than expected 8.3%, leading to an aggressive sell-off in global equity and bond markets, and reinforcing the view that the Fed will hike by a further 0.75% next week, with rates forecast to peak around 4.45% next year.

The European Central Bank are also expected to continue their aggressive cycle of policy tightening following the unprecedented 0.75% increase earlier this month, as they focus primarily on inflation, despite the dire economic outlook and the huge concerns over gas supplies.

Market volatility remains at extreme levels on the huge uncertainty, with the global economy facing the unprecedented challenges of surging inflation, rising interest rates, war in Ukraine, lockdowns in China and the ongoing supply chain issues.