21 June 2023
If you are covering the latest UK inflation statistics, please find below a comment from Marcus Brookes, chief investment officer at Quilter Investors:
“Today’s inflation figure will be a bitter pill to swallow for consumers, investors and the government. With CPI unchanged and core inflation rising, this confirms that the Bank of England has no choice but to raise interest rates tomorrow. Having jumped down from double digits last month, we are once left to wait for inflation to return to its downwards trajectory to normal levels. The UK really does seem to be suffering from a more unique set of circumstances and this is leaving the Bank of England with little choice, despite consensus that this inflation is driven more by supply issues than demand ones.
“Ultimately, while the UK consumer has held up fairly well in the cost of living crisis to date, we are starting to see signs of buckling, with the looming mortgage shock coming further into view and interest rates now beginning to bite on households. Subsequent rate rises are going to stoke mortgage fears further, but the Bank of England will feel like it has no choice, especially with core inflation now rising again.
“Unlike our US counterparts, there is unfortunately more pain to come in the shape of higher interest rates, and signs are pointing towards tomorrow’s rise not being close to the last. Any thoughts of a pause, let alone rate cuts, seems incredibly premature, highlighting the economic muddle the UK faces.
“While we await for the interest rate rises to date to properly take effect, for investors the message remains clear – stay calm and patient. Markets are forward looking and much of this economic strife will be priced in, although volatility will remain present should data surprise in the future. Quality companies and investments will be crucial to weather this storm and ensure inflation doesn’t come to hit your investments as well as the pound in your pocket.”
