The Evelyn Partners Investment Podcast: What’s next on inflation?

In October’s episode of the Evelyn Partners Investment Podcast Cherry Reynard and Ben Seager-Scott look at whether the recent bounce in the US CPI is a sign that the war on inflation is not yet won. They discuss the impact of higher energy costs and whether further rate rises are likely. Markets have been wobbly, as investors fear higher rates, but is this justified?

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US inflation appeared to be in retreat, prompting the Federal Reserve to pause on interest rates. However, the most recent CPI data showed price rises picking up again. This has spooked markets, who believe it might suggest a ‘higher for longer’ interest rate environment. However, much of the recent volatility can be attributed to rising energy prices, and core inflation continues to fall.

Expectations are still for a ‘soft landing’ for the US economy. Elsewhere, the problems may be more entrenched, particularly in the UK where services and manufacturing data are notably weakening. The Bank of England has responded by pausing on rates. However, it remains unlikely that any major country will experience a deep recession.

Emerging markets have been a weak spot for much of this year, with China’s anaemic recovery slowing growth in Asia and elsewhere. However, there are idiosyncratic opportunities across emerging markets, particularly as some central banks start to cut interest rates.