10th August 2023
If you are covering the rise in the US inflation rate, please find below a comment from David Henry, investment manager at Quilter Cheviot:
“While a rise in the US inflation rate was widely predicted due to seasonal factors, the fact it came in fractionally under expectations will likely buoy markets thinking the Federal Reserve has enough cover now to hit the pause button on the interest rate rises and allow what has been done to date take effect. The fact of the matter is that the Federal Reserve is in an enviable position that it has inflation down near target, if not quite there yet, and an economy that continues to defy the odds and produce results. It will be a while before we can declare a ‘soft landing’ as achieved as things change very quickly, but the signs are looking positive.
“Core inflation continues to be more stubborn, and it will be important that this begins to fall more into the Autumn, when the seasonal factors should subside. However, those expecting cuts at some point this year or early next year may be disappointed. The Fed has stated rates will stay sufficiently high for the immediate future and it will be desperate not to have a repeat of the 1970s, where we saw inflation spike again as central banks were too early in easing off on monetary tightening.
“Investors should be wary that single data points continue to have a significant impact on markets, so while the battle to bring inflation down is not over yet, it is our view that clients would be best advised to remain invested in those quality names that can thrive in uncertain times.”
