Inflation & Interest rates Higher for Longer = Markets Lower for Longer

Inflation & Interest rates Higher for Longer = Markets Lower for Longer

Taking Stock on Thursday 17th January 2024

Investors trim BoE rate cut expectations after inflation rises

UK Inflation Data CPI 

Year on Year to December 

Actual 4% 

Forecast 3.8% 

Previous 3.9% 

Month on month to December 

Actual 0.4% 

Forecast 0.2% 

Previous -0.2%

Investors pared back expectations for Bank of England interest rate cuts over the coming year after data on Wednesday showed an unexpected rise in Britain's rate of consumer price inflation.

Traders are pricing in a more than 50% chance the central bank will hold rates in May.

Interest rate swaps showed 15 basis points of BoE rate cuts priced in by May in early trade on Wednesday, compared with 21 basis points on Tuesday.

For the end of 2024, 114 bps of BoE rate cuts are now priced in, compared with 122 bps on Tuesday.

Ruth Gregory, deputy chief UK economist at Capital Economics, said it expected inflation to fall below the Bank's 2% target in April, which would leave policymakers "in a position to cut interest rates by June".

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, agreed that energy prices falling further would drive down overall inflation, which he said should give the Bank "confidence" to cut its rate for the first time in May, "or failing that in June.

However, he did warn that the five cuts priced in by investors to bring rates down to 4% this year looked a "stretch".

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Companies discussed on “Taking Stock” today:

01:30 Persimmon #PSN 
10:00 Silver Bullet Data Services #SBDS 
11:20 Oxford Biodynamics #OBD 
18:40 Poolbeg Pharma #POLB 
19:35 Acuity Group #ACRM 
20:55 Tirupati Graphite #TGR 
21:40 Frontier Developments #FDEV 
23:30 Team17 #TM17 
24:20 Nexteq #NXQ 
26:00 Capita #CPI 
28:35 James Cropper #CRPR 
30:05 Hornby #HRN 
32:09 Portmeirion Group #PMP
33:50 Gamma Communications 

TOP BUSINESS STORIES

UK house prices fall by the most since 2011

British house prices fell by the most in more than 12 years in November, dropping by 2.1% compared with the same month in 2022, the Office for National Statistics (ONS) said on Wednesday.

In October, prices fell by 1.3%, the ONS said.

London was the region with the biggest annual decrease, with prices in the capital falling 6.0%, it said.

Other measures of Britain's housing market have shown signs of stabilisation in recent weeks with some gauges of house prices rising as demand picked up after mortgage rates appeared to have peaked.

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Apple overtakes Samsung as world's biggest phonemaker

Apple now has the lion's share of the global smartphone market, knocking Samsung off the top spot for the first time in 12 years.

The American phone giant accounted for more than a fifth of phones shipped last year, according to data from the International Data Corporation (IDC).

Samsung took 19.4% of the market share with Chinese phonemakers Xiaomi, OPPO and Transsion following behind.

Smartphone sales have been faltering as many people upgraded in the pandemic.

The IDC reports that almost 1.2 billion smartphones were sold last year - a drop of more than 3% on the previous year. It is the lowest amount sold in a decade, with many consumers tightening their purse strings in the face of economic challenges and high interest rates. Experts predict the market will recover this year.

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