Since Jeremy Hunt’s U-turn on the previous fiscal plan sterling has, overall strengthened against the US dollar, albeit with those gains pulled back a little yesterday. However, that is primarily down to a weaker dollar and against the euro the pound is tracking lower than last week.
Britain’s annual inflation rate has been released this morning and has risen to 10.1%. This reflects a 0.5% rise in September and surpasses economists’ expectations. The rate is currently at a 40-year high.
As well as the new chancellor Jeremy Hunt shredding Truss’s tax-cutting plans, yesterday he reported that spending cuts are on the horizon. Moreover, Liz Truss will no longer defend the triple lock on pensions. The triple lock guaranteed that UK state pension will rise each year in line with inflation, with earnings or by 2.5%, whichever is the highest. However, the prime minister’s spokesperson confirmed that the triple lock is now up for negotiation, despite the Conservative Party vowing to “keep the triple lock” In their 2019 manifesto.
The commitment to raise defence spending to 3% of GDP by 2030 has been kept.
Yesterday, eurozone market watchers saw Germany’s ZEW economic sentiment rise slightly to -59.2. The rise was above market expectations of -65.7 and a slight improvement from the previous month’s 14-year low. Despite the rise, the latest reading suggested markets still remain pessimistic about the economic outlook over the next six months.
In the US, the fight against inflation continues. The Fed’s policymakers agreed that raising the Fed funds rate faster now would “prevent the far greater economic pain associated with entrenched high inflation, including the even tighter policy and more severe restraint on economic activity that would then be needed to restore price stability”.
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