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Summary of the UK Economy(Mar-2024) Technical Recession; 2 consecutive quarters of recession Rising Inflation Trade deficit United Kingdom, the Bank of England's base rate is 5.25% (2024-03-21) and has been frozen five times. Summary of the UK Economy GDP Projections; Bank of England The Bank of England's forecast for UK economic growth is shown above. 2022 (actual) : 4.3% 2023 (forecast) : 0.3% 2024(forecast) : 0.3% 2025 (forecast) : 0.8% We assume the 2023 forecast is nearly realistic, and we also forecast low growth of 0.3% in 2024. Quarterly economic growth rates for 2023 are shown below. 1Q 2023 : 0.2% 2Q 2023 : 0% 3Q 2023 : -0.1% 4Q 2023 : -0.3% With three and four consecutive quarters of negative growth in 2023, we are characterizing this as a technical recession. CPI Projections; Bank of England Looking at the inflation outlook, we expect inflation to stabilize after reaching +4.2% in Q4 2023. In January 2024, the Consumer Price Index (CPI) stood at 4.0%, down -0.6% mon

US Producer Price Index (PPI) Rises, Signs of Inflation... Will the US FOMC Delay Rate Cuts? U.S. PPI sees 6-month high The Producer Price Index (PPI) affects the Consumer Price Index (CPI). An increase in PPI can lead to an increase in CPI, usually with a 6-month lag. Based on the February 2024 PPI, it is likely that CPI and consumer prices will be higher by August. US PPI Rises, Signs of Inflation Will the U.S. Federal Reserve (Fed) FOMC Delay a Rate Cut? FOMC meets next week (Nov. 19-20) PPI; FRED Looking at the February 2024 PPI, inflation excluding food and energy prices was slightly lower than the previous month at +0.3%. However, the PPI was at its highest level in six months at +0.6%. Both were above expectations. The PPI is considered a leading economic indicator and, assuming a six-month lead, suggests that higher prices are likely to persist through the middle of the year. Looking ahead to the US FOMC meeting next week (19th-20th), the CPI and PPI releases suggest that infla

Fed rate cuts to be hard?… Inflation target 2% "Fed needs to be confident of reaching its 2% Inflation target." For the U.S. Federal Reserve to cut interest rates, it first needs to have strong confidence in reaching and maintaining its 2% inflation target. Over the past year, inflation has been falling steadily, but not enough to reach the target, and the economy is showing signs of improvement. The question for the Fed is. If it cuts rates too soon, it will fail to reach its 2% inflation target and potentially cause high inflation to become entrenched. If they cut rates too late, high-interest rates could push the economy into recession. Fed Chairman Jerome Powell's comments echo that concern. “Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%.”, “At the same time, reducing policy restraint too late or too little could unduly weaken econom

U.S. PCE inflation data shows inflation stabilizing... a green light for rate cuts later this year January 2024, core PCE index 0.4% ... up 2.8% yoy The US Federal Reserve's benchmark interest rate decision is driven by inflation (Personal Consumption Expenditures (PCE)) and employment data (with a focus on the unemployment rate), with PCE inflation and the unemployment rate driving the larger picture. The U.S. Fed focuses on the central bank's mandate of price stability and prioritizes price stability over economic growth in determining monetary policy. This is a common mandate for all major central banks around the world, most of which have a target inflation rate of 2.0%. Bureau of Economic Analysis (YoY)PCE, PCE(*excluding food and energy) prices fall for 5th consecutive month ... inflation stabilizes (MoM)PCE, PCE(*excluding food and energy prices) inflation up slightly Year-over-year, inflation has been relatively stable and is approaching the US Federal Reserve's 2%