Whilst a lagging indicator, there was good news for the UK economy, expanding by 0.2% in August. Whilst this was in line with the consensus forecast, the positive figure was welcome after the economy flatlined in both June and July. Year on year growth therefore stood at 1%. Not a great figure in absolute terms, but it maintains the upward trend all the same. Fingers crossed the Bank of England can achieve monetary policy to keep this going and the forthcoming budget can encourage further growth rather than dampen spirits.

Meanwhile, there were two key pieces of information which investors were waiting for from the US. The first was, you guessed it, the latest inflation figures. Here we saw the year on year rate continue to edge down towards target, reaching 2.4%, down from the previous reading of 2.5%. Whilst heading in the right direction it didn’t fall as much as anticipated, with 2.3% having been expected. Perhaps a little more disconcerting for the Federal Reserve, however, was the slight pickup seen in core inflation, which excludes the more volatile food and energy components. This came out at 3.3% year on year to December, against an expectation of 3.2%. Much will depend on data released between now and then, but this perhaps indicates that the next rate cut will be 0.25% rather than the 0.5% seen previously.

That ties in nicely with the release of the minutes from the previous meeting where that cut was made, also released this week. These showed that all voting members except one had voted for a 0.5% cut, with the dissenter in favour of 0.25%. Within those minutes, however, the committee was also clear in that the 0.5% cut should not be seen as evidence of a less favourable economic outlook compared to a smaller cut being made. They were also keen to express that moves of this magnitude should not be seen as the norm moving forward, or that easing will be quicker than the path initially believed. We have third quarter company earnings upon us soon, but for now the markets appear macro focussed and driven.

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