Introduction: UK inflation report and Fed decision in focus
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The cost of living squeeze is in focus on both sides of the Atlantic today.
In the UK, inflation is expected to fall when the latest consumer prices index data is released at 7am.
The annual CPI index is expected to have risen by around 9.9% in February, down from 10.1% in January. That would be the lowest reading since last August, and a welcome return to single-digit inflation.
However, falling inflation does not mean that prices are falling – simply that they are rising less quickly (compared to a year ago).
Yesterday, chancellor Jeremy Hunt warned the House of Lords Economic Affairs committee that inflation was “dangerously high”, at over 10% adding “we need to do everything we can to maintain our focus on bringing it down.”
Falling inflation would please the Bank of England, which will release its decision on UK interest rates at noon tomorrow.
Today, though, it’s the US central bank’s turn to set borrowing costs.
Before the banking crisis blew up this month, the US Federal Reserve had been expected to hike interest rates by a half of one percent, another large increase. But with three US banks having failed in the last few weeks, the Fed may be more cautious.
Economists broadly expect a quarter-point increase from the Fed tonight (the decision is 6pm UK time, or 2pm in New York). But they could surprise Wall Street by holding borrowing costs…
Naeem Aslam, chief investment officer at Zaye Capital Markets, explains:
Heading into the meeting, the Fed is expected to raise interest rates by 25 basis points, which is still much lower than when Jerome Powell, the Fed Chairman, delivered his statement to Congress a few weeks ago.
Traders began pricing in a 50 basis point interest rate rise for today’s meeting at the time. Yet, the crisis in US regional banks has caused traders to reconsider their views, and the broad belief today is that the Fed will take its foot off the gas pedal.
We’ll hear from Fed chair Powell tonight too, and gauge how concerned he is about the banking crisis, and the economy…
7am GMT: UK inflation report for February released
7am GMT: UK PPI report of producer price inflation released
9.30am GMT: UK house price index
2.15pm GMT: UK Treasury committee to quiz the independent Office for Budget Responsibility (OBR) on the budget
6pm GMT: Federal Reserve decision on US interest rates
6.30pm GMT: Fed chief Jerome Powell holds press conference