The Consumer Price Index for October jumped 11.1% YoY, smashing estimates of 10.7%, reported the Office for National Statistics. The inflation report was released ahead of the Autumn Budget today, which is expected to show a fiscally responsible government under the new Prime Minister Rishi Sunak. Following the release of the UK inflation report, the Bank of England Governor Andrew Bailey said that inflation is reflecting a series of supply shocks. However, he added that those shocks are beginning to fade and noted that the central bank would raise rates further. In the meantime, the BoE’s newest member Swati Dhingra said the UK could get into a much deeper recession if rates continue to rise. After a busy economic day, the GBP USD continued its uptrend.
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12.00 Autumn Budget
European Central Bank policy makers may slow down interest-rate hiking with only a 50 basis-point increase next month, according to people with knowledge of the matter. Initial discussions suggest a lack of momentum for another 75 basis-point move at present. Barring another surprise surge in inflation, the consensus might well favor the less aggressive step. Among reasons cited are mounting recession risks, the possibility that consumer-price pressures will weaken and the prospect that a half-point move in the deposit rate to 2% will reach close to a so-called neutral level that no longer stimulates the economy.
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US stocks are trading in the red after a solid US Retail Sales report. The US Department of Commerce reported that sales grew the most in eight months, with readings hitting 1.3% MoM vs. 1% estimated by analysts. Retail Sales in the control group, used to calculate Gross Domestic Product, expanded by 0.7% MoM vs. 0.3% foreseen. Even though inflation data in the United States showed signs that an era of elevated prices could end, consumer resilience proves otherwise. Instead, Federal Reserve officials could be forced to continue its aggressive tightening, although they expressed a desire to slow the pace of tightening conditions. Further US data revealed during the day saw Industrial Production plunging from September’s 0.1% to -0.1% MoM, below estimates of a 0.2% increase. New York Fed President John Williams said that price stability is essential for the US economy to function well. San Francisco Fed President Mary Daly said the central bank wants to see the economy slow, so they can get inflation down. She added that “Pausing is not part of the discussion” and foresees the Federal Funds rate to peak at around 4.75% – 5.25%
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