19th September 2023

Market Report-Hargreaves Lansdown

Susannah Streeter, head of money and markets, Hargreaves Lansdown, comments:

"The Bank of England is expected to proceed with another hike on Thursday, given that wage inflation is still considered to be far too hot to ignore. Wednesday’s inflation snapshot will be closely watched for signs that core inflation, which strips out the volatile food and energy prices, is still proving sticky. However, the cost-of-living crisis, high borrowing costs, bad weather and strikes all conspired to cause the economy to contract in July. Residential rents are now rising at their fastest rate on record, chipping away more consumer resilience. Monthly rents are on average 12% higher than they were just a year ago according to Hamptons, as people put off house moves, and competition intensifies, and landlords hit by higher borrowing costs charge more. The stage is set for more demand to be squeezed out of the economy, which should help limit price rises in the economy going forward. So, the September rate decision may well mark the end of the hiking cycle, given that unemployment has also ticked up, companies are showing more reluctance to hire staff and we have still yet to feel the full effect of previous rate increases. But higher rates are set to linger given that the 2% inflation target still seems so far away, so right now a cut isn’t expected until at least the second half of next year.

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