From a global macro perspective, the most consequential events likely came from overseas. In a clear demonstration that the fight against inflation is far from over, the Bank of England raised its benchmark rate by 50 basis points instead of the widely expected 25. The move shouldn’t be entirely surprising. The country’s core inflation rate is still rising and just hit a high of 7.1%. Assuming that several more hikes are likely yet before it gets under control, it might make a recession an inevitability. GDP growth has been essentially flat for four straight quarters and the direction of both rates and inflation will probably accelerate the economic slowdown further.
The BoE isn’t the only European central bank to take the aggressive path last week. The Norges Bank, which is the central bank of Norway, also hiked by 50 basis points instead of 25. The Swiss National Bank also hiked again by 25 basis points. Norway’s inflation path is almost identical to that of the United Kingdom, while Switzerland is in a comparatively better spot. All, however, have indicated pricing pressures well into 2024. Wage growth is expected to keep inflation high. The Swiss Bank is forecasting a second round of high inflation in 2024. Europe looks like it might be in big trouble here with growth already non-existent and inflation still spiraling out of control.
