Weekly Market Update- Week Ending 03/11/2023

After a tough October for investment markets, the start of November saw a welcomed bounce as investors reacted positively to a number of central bank interest rate decisions.

The Bank of England (BoE) announced that interest rates would be held for the second consecutive month at 5.25%. Six members of the monetary policy committee voted for a pause, while three members felt that a further rise was justified at this time. Whilst the pause will be welcomed by most, in a statement from the bank they warned that “monetary policy is likely to need to be restrictive for an extended period of time.”

With CPI inflation (6.7%) over three times the BoE’s target in September, the committee will continue to watch the data over the next few months; this will determine whether further rises in the cost of money will be required to ensure inflation returns to 2%. Inflation figures for October look key and are due to be released on the 15th November. Economic forecasters predict we could see a decent jump down (1% or more) as the latest fall in the energy price cap is captured by the data.

Across the pond, the US Federal Reserve, as expected, kept its interest rate unchanged at a range between 5.25% and 5.5%. The markets (both equity and fixed interest) cheered the comments from Chair Jay Powell in the press conference as he cast doubt over a need to hike further when they next meet in December. He said the central bank could afford to proceed “carefully” with future decisions, but stressed the committee “is not thinking about rate cuts right now at all.”

John Naylor, Chartered FCSI – Head of Investment Committee