A UK inflation reading of 9% underlines just how much higher interest rates might be headed
An employee passes share price information displayed on an electronic ticker board inside the London Stock Exchange Group’s offices in London, the UK. Picture: BLOOMBERG VIA GETTY IMAGES/LUKE MACGREGOR
Many analysts have characterised this week’s sharp rally as a short-term bounce of the sort common during a lengthier downward trend for equities. Few are willing to predict the end to selling after a bruising first five months of the year for risky assets given so much macroeconomic uncertainty. In currency markets, sterling was the big loser, shedding 0.9% to $1.2387 after UK consumer price inflation hit 9% in April, a 40-year high and roughly in line with analysts’ expectations. The pound had risen sharply this week and some of Wednesday's fall was down to profit taking.
Investors have priced in 50-basis-point US rate hikes in June and July and see the benchmark Fed funds rate nudging 3% by early 2023. On Wednesday Brent crude futures gained 1.3% to $113.38 a barrel and US crude futures rose 1.64% to $114.24 a barrel.
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