Moneyfarm’s Chief Investment Officer, Richard Flax, gives his expert analysis of the latest inflation data from the UK and Europe, including possible central bank interest rate decisions and the path back to the 2% target.
“Annual headline inflation in the UK has remained unchanged at 6.7% in the year to September, the same rate as in August. The identical annual inflation rates in August and September largely reflect offsetting contributions from four main areas,” explains Richard.
“The largest downward contributions came from food and non-alcoholic drinks, where prices fell on the month for the first time since September 2021. However, these declines were offset by upward contributions from transport, and restaurants and hotels. Core CPI (which strips out energy, food, alcohol and tobacco) rose by 6.1% in the 12 months to September, down from 6.2% in August. Whilst it may seem insignificant, it’s a sign that inflation could be easing.
“The announcement only puts further pressure on the Bank of England’s Monetary Policy Committee, and whether they decide to continue to apply interest rate pressure to bring inflation down to an acceptable level.
“Whilst there are points of encouragement from today’s figures, the global macroeconomic outlook is still uncertain and emerging tensions in the Middle East could have real consequences on commodity prices including the price of oil which will have knock-on effects for inflation in the UK.
“Meanwhile, inflation in the eurozone is now at its lowest levels in two years, as confirmed by the final September reading. Consumer prices rose by 4.3% in September, down from 5.2% in August – in line with the flash reading a few weeks ago, suggesting that the steady interest rate hikes by the ECB are starting to take effect. Today’s data also reinforces views that the Eurozone may well have reached the peak of the inflation cycle and makes the case for a pause at the next ECB meeting.”
Richard Flax: Richard is the Chief Investment Officer at Moneyfarm. He joined the company in 2016. He is responsible for all aspects of portfolio management and portfolio construction. Prior to joining Moneyfarm, Richard worked in London as an equity analyst and portfolio manager at PIMCO and Goldman Sachs Asset Management, and as a fixed income analyst at Fleming Asset Management. Richard began his career in finance in the mid-1990s in the global economics team at Morgan Stanley in New York. He has a BA from Cambridge University in History, an MA from Johns Hopkins University in International Relations and Economics, and an MBA from Columbia University Graduate School of Business. He is a CFA charterholder.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
