Weekly Market Update 13/09/2024

According to official figures released on Tuesday by the Office for National Statistics, UK wage growth slowed in the three months to July, with the data showing growth of 5.1% compared to 5.4% in the three months to May, in line with analysts’ expectations. This came off the back of weakening payroll employment and hiring, with the ONS saying that tax records showed employment fell by 6,000 in July and by 59,000 in August.

Although wage growth is slowing, members of the Bank of England’s Monetary Policy Committee will want to see clear evidence that inflationary pressures are easing before cutting interest rates again.

On Wednesday, more ONS data revealed the UK economy stagnated for a second consecutive month in July, registering a paltry growth figure of 0.1%, below economist expectations of 0.2%. In currency markets the reaction was muted, with sterling remaining steady against the dollar. Markets still expect the MPC to hold rates at 5% at next week’s meeting but anticipate a cut in November as inflation rose less than expected to 2.2% in July.

Across the Channel, the European Central Bank cut interest rates on Thursday by a quarter of a percentage point to 3.5% as Eurozone inflation continues to fall. The decision to make the second cut of the year was unanimously made, unlike the previous rate cut in June. It was signalled however that it was unlikely rates would be cut again in October, as although inflation is falling the bank is “not looking at a single indicator”. The US Federal Reserve is also expected to cut rates next week, in an eagerly anticipated move, with futures markets currently forecasting a full percentage point cut by the end of the year.

Olivia Liburd
Investment Management Team Assistant