The UK inflation rate posted a four-year high of 2.9% yesterday. The rise in prices for recreational and cultural goods and services were noted as the main contributor for the increase in rates, with fuel costs falling again for the third month in a row. The rate has been moving past the Bank of England’s target of 2% over the past few months and towards the 3% mark which would mean Mark Carney would need to write a letter to the Chancellor of the Exchequer explaining the reason behind the increase and proposed actions. The Bank of England are scheduled to meet today, with the meeting minutes and rate decision being released tomorrow. With inflation continuing to rise, focus will be on the number of votes for increasing the interest rate.
Theresa May began talks with the Democratic Unionist Party yesterday, in the hope to come to a deal in which DUP will support the Conservative minority government. May has taken full responsibility for the disastrous election stating ‘I’m the person who got us into this mess and I’ll be the one who will get us out of it.’ To allow the Conservatives to pass laws in the House of Commons, they need over 326 seats, however they are currently eight short. May is hoping a deal with the DUP will top up their support to over 328.
The focus will be on the US today, with the announcement of the Fed interest rate decision. It is widely expected the Fed will announce a rate hike taking the interest rate to 1.25%, and if they do, it is unlikely to move rates significantly. As the markets are expecting a rate rise, there will be a lot of focus on the FOMC statement which will give an indication of their view on the economy and future rate hikes.
Also, out from the US is the CPI and Retail Sales figures as well as the FOMC Economic Projections. Back in the UK, the average earning index will be posted, expected to remain at 2.4%.