USA and EU Latest Inflation and Interest Rates
Published / Last Updated on 16/06/2023
USA Inflation
CPI Inflation figures for May were published yesterday (15th June) in the USA by the Labor Dept. Inflation continued to fall from 4.9% pa (April 2023) to 4.0% pa in May 2023. This was caused by yet further falls in fuel prices and confirms the US Federal Reserve’s more aggressive interest rate policy compared to UK and Europe is reducing inflation faster. This is the 11th consecutive month that inflation has fallen in the US. The Fed then decided to keep interest rates in a range 5.0% to 5.25% pa but suggested it may increase rates twice again by the end of the year. This may or may not happen depending upon how inflation pans out over the summer, we expect further falls as food prices fall.
EU Inflation
In Europe, inflation figures for May were released on Thursday and fell to 6.10% pa, down from 7.0% pa in April. Food and alcohol prices remain stubbornly high, as they do in the UK, but remember, in the EU this is an average inflation measure across members states. There is a mixed bag when you drill down to member states with the big 4 economic powers: German inflation 6.3% pa, French inflation 6.0% pa, Italian inflation 8.1% pa and Spanish inflation at just 2.9% pa. Meanwhile, many eastern European nations are still running at 10%, 11% and 12% pa + inflation. The European Central Bank had already made its move to increase interest rates the day before by 0.25% to 3.50% pa with Christine Lagarde suggesting interest rates will be increased again in July.
UK
All investors are now switching their attention to UK inflation figures (due on 21st June) and expected to come down to 6.1% pa with the Bank of England then expected to increase interest rates the next day by 0.25% pa to 4.75% pa.
Comment
Markets should react well around the globe although we expect the £ to strengthen, FTSE 100 may fall slightly, and gilt and fixed interest funds may fall in value as yields rise.
More mortgage misery for those buying or remortgaging their properties. On a positive note, it will also mean that those with bank deposit savings will get more interest and those seeking pension annuities should get higher annuity rates.