Weekly Market Update – Week Ending 22/03/24

It was a strong week for financial markets with investors cheering central bank interest rate decisions.

On Wednesday, the Federal Reserve (Fed) held US interest rates at the range of 5.25%-5.5%. The move was widely expected, but what pleased the market was that Fed officials are still forecasting three rate cuts for this year. There had been fears amongst investors that with recent economic data continuing to look robust, the pace of any future reductions in the cost of borrowing could be slowed.

Closer to home, the Bank of England (BoE) also held interest rates at 5.25% on Thursday for the 5th meeting in a row. By a vote of 8 to 1, the Monetary Policy Committee felt rates were sufficiently high enough to continue to bring inflation towards their 2% target. The two members who at the last meeting called for rates to be increased, voted instead for no change. Following the announcement, interest rate expectations moved marginally lower, causing sterling to fall against both the dollar and euro.

Given the news this week that UK inflation continues to fall, and with the energy price cap reduction coming in April, interest rate cuts can’t be too far away. The market currently forecasts the BoE could start in June, with two or three 0.25% falls potentially on the cards before the year ends.

John Naylor, Chartered FCSI
Head of Investment Committee