Markets rethink the likely date that Fed will start cutting rates

Markets rethink the likely date that Fed will start cutting rates

In the US, inflation data was hotter than anticipated at 3.1% for January (2.9% forecasted). This caused a rethink of when the Fed might begin rate cuts. Stocks sold-off following the data but recovered, helped by UK CPI data which unexpectedly showed annual inflation held steady at 4% in January. Even with weaker-than-anticipated US retail sales data on Thursday, the majority of investors are now looking at a date beyond May for the first cut. With the US economy remaining strong some Fed officials have commented that there is no rush to lower rates just yet.

US Producer Price Inflation data released on Friday also came in above forecasts and stocks gave back some of the gains made on Wednesday and Thursday.

The UK economy entered a technical recession last week. The GDP growth rate declined 0.3% over the fourth quarter of 2023, following a 0.1% contraction in the third quarter. Andy Haldane, former chief economist at the BoE said in an interview today (Monday) that the recession could be made worse if the central bank keeps interest rates at the current level for much longer.

Finally, the price of oil rallied 3% last week and Light Crude futures today are close to their highest level since early November. This needs to be watched.

US Risk Barometer 16th February 2024

Europe Risk Barometer 16th February 2024

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