Bank of England chief economist Pill stated that the central bank is not going to move at a pre-defined pace at every meeting, but there is more to do and rates need to increase further to tighten monetary policy. He added that the bank should not be seen as inflation nutters and that at some point the wider economic outlook needed to be considered. According to Pill, the economy is entering a recession and that it is a difficult trade-off environment for monetary policy. Sterling lost ground ahead of the New York open with further concerns over the UK policy mix and a notable lack of confidence in the domestic fundamentals. Overall risk trends remained important with Sterling trends influenced strongly by the extent of optimism over the global economy and equity-market developments.
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Euro-Zone retail sales increased 0.4% for September after a revised figure of no change for August with the year-on-year decline held to 0.6% from 1.4% previously. ECB vice-president de Guindos stated that the bank will start bond selling through quantitative tightening sooner or later and for sure during 2023. The Euro edged lower in early Europe, although the overall ranges were narrow amid a lack of fresh incentives with dollar demand subdued.
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The US NFIB small business confidence index edged lower to 91.3 for October from 92.1 the previous month. There were further concerns over inflation pressures with 33% of companies stating that inflation was the single most important issue, the highest proportion since the end of 1979. There will be caution ahead of Thursday’s US consumer prices data given the importance for near-term Federal Reserve policy decisions. Markets have been more optimistic that the Fed can slow the pace of rate hikes and a slowdown in inflation would reinforce expectations, but strong data would dash these hopes.
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