US inflation dumped
The Bank of England's Monetary Policy Committee cut interest rates for a sixth time in this cycle as expected today, by 25 basis points, to 3.75 per cent, albeit with a split decision.
Following on from
Wednesday's post about the potential for lower than expected inflation...what the heck was today's report from the Bureau of Labor Statistics all about?
October's US inflation figures weren't reported due to the government shutdown, but economists expected 3 per cent inflation over the year to November 2025.
In the end, the figure was considerably lower than expected at 2.7 per cent (denoted by the tentatively marked blue cross on the second chart below).
Core inflation was also far below expectations for a 3 per cent rise - at just 2.6 per cent - for the lowest reading since 2021 (denoted by the red dot on the second chart below).
Source: BLS
These figures certainly look a bit odd and have potentially been distorted by the shutdown, so although markets will likely rally on the news, it would probably be prudent to see what the next month brings before popping the champagne corks.
Still this does call into question whether tariffs have really increased inflation as was widely predicted.
It was reported last week that the US unemployment rate increased to a 4-year high of 4.6 per cent.
Bond markets were certainly sceptical about today's inflation figures, the US 2-year treasury yield initially falling only modestly, but still it looks likely on this evidence that interest rates will be heading lower. (net bullish for risk assets - stocks, gold).
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