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US inflation data March 23

ended 12. April 2023

The latest US inflation data has just been published, showing that, over the last 12 months, CPI increased 5% - lower than expected and the lowest level of annual US inflation in almost two years. You can read the full report from the US Bureau of Labor Statistics >> here <<. What impact could this have on rate policy at the US Federal Reserve and how could this influence the Bank of England in terms of its next rate decision? Also, what ramifications could this have for the UK mortgage and property market, and equity markets more broadly? No need for an essay, just a few lines will do as this story is BREAKING. 

7 responses from the Newspage community

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Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Inflation is the silent killer when it comes to protecting purchasing power. Any news of lower-than-expected inflation should be well received, contributing to more optimistic sentiment among businesses and consumers alike. It is also a positive for equity markets.
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Chris Barry
Director at Thomas Legal
The latest US inflation data makes for positive and promising reading. The Fed is more likely to ease rate hikes, meaning we should start to see a period of rate stability over the coming months, possibly followed by gradual reductions. The UK has historically followed the US closely so this latest CPI print should provide the UK housing market with some much-needed confidence.
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Philip Dragoumis
Director and Owner at Thera Wealth Management
Inflation is a 2022 story and not just in the US but also in the UK and Europe. Interest rates have been hiked so much that banks are going bust. The issue now is growth, or rather the lack of it. All the indicators are pointing to growth slowing and even a possible recession. The central banks can either start acknowledging this now, or just make it worse by continuing to hike.
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John Choong
Senior Equity Research Analyst at Investing Reviews
While CPI has dropped to its lowest levels in almost two years, core CPI remains frustratingly sticky, as services inflation continues to run hot. As such, markets are still expecting the Fed to raise interest rates by another 25bps at its May meeting, with a probability of 65%. Therefore, it's no surprise to see the initial pop in S&P 500 Futures finding some relief.

That said, it's encouraging to see the shelter print, which makes up a third of core CPI, coming down to 0.6% from 0.8% in February. This decline is expected to continue in the coming months -- and when realised, could see the Fed pivot towards the end of the year as core CPI plummets.

Given the BoE's more dovish stance, they're more likely to pivot before the Fed does, indicating rate cuts this year. This should provide some additional support to the UK housing market through lower mortgage rates, and bring some relief to housebuilders. In fact, housebuilder stocks have popped on the latest news.
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Bradley Lay
Founder at Peak Capital Group
The latest US inflation data is encouraging news. With the CPI increasing only 5% over the past year, the Federal Reserve may hold off on any rate hikes, creating a more stable economic environment. This could have a positive impact on the Bank of England's next rate decision and could potentially provide a boost to the UK mortgage and property market. Additionally, equity markets may experience increased investor confidence as the threat of rising interest rates diminishes.
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Gary Bush
Financial Adviser at MortgageShop.com
US inflation rate data does show good news for them, I don't think however this will equate much to us in the UK when our latest data is released. I think, from the level of productivity being seen, that our spending patterns are showing that we are pushing through the high inflation figures regardless - it would be good to see the UK inflation rate decrease but I don't see anything lower than 8% in the near term. As a knock-on of this, I can't see the BOE reducing the base rate anytime soon, the good news is that the mortgage fixed rates are still decreasing as they have a close eye on the decreasing shorts situation.
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Rob Gill
Managing Director at Altura Mortgage Finance
'When the US sneezes, the UK catches a cold' has long illustrated the close links between both economies and how, where the US leads, the UK tends to follow. This significant fall in US inflation should therefore translate to our side of the pond before long, in turn allowing the Bank of England to start reversing recent rate hikes.