31 January 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“The Nationwide House Price Index has brought a little more optimism this morning, showing UK house prices rose 0.7% month on month in January, and are now down by 0.2% compared with a year ago. Of course, with CPI standing at 4% in the year to December the real impact is more noticeable, however, the direction of travel is at least improving. The survey cites improving mortgage rates as a factor in this, but also notes that mortgage rates of 3% would be needed for this measure of affordability to return to its long run average. By the end of 2024, 60% of mortgages will have rolled off 2022 rates onto new mortgages, typically at significantly higher rates, acting as a continuous economic headwind until rates can fall more significantly.
“US job openings came in well ahead of estimates yesterday afternoon but were largely unchanged over the month, demonstrating the labour market remains an important driver of economic growth. With consumer confidence also coming in slightly ahead of estimates and hitting a two-year high, it’s clear that falling inflationary forces are starting to make respondents feel a little more optimistic about the direction of the economy.
“Whether the Federal Reserve agrees will be made clear tonight, as its latest policy setting meeting concludes. The December meeting saw the ‘Santa rally’ shift into a higher gear, as it signalled three rate cuts in the year ahead. With the economy showing largely strong data points since then, albeit with the preferred measure of inflation very much on target, the market has cut the likelihood of a first rate cut in March from 73% at the end of 2023 down to 39% now, but this meeting will almost certainly trigger further calibration around the extent and timing of future cuts.”
