The US Federal Reserve is set to announce its latest interest rate decision in just under four hours, with expectations that it will hold rates steady. Markets are eagerly awaiting the subsequent press conference chaired by Fed chair Kevin Warsh for any clues on future rate policy.
Back to our main story, UK inflation holding at 2.8% in May. Here is our analysis:
As soon as Iran choked off oil supplies through the Strait of Hormuz at the start of March, there were dire warnings about rocketing UK inflation and the drastic action the Bank of England might take to rein it in. At one point, investors expected as many as three quarter-point rises in interest rates before the end of the year, a sharp turnaround from earlier forecasts of rate cuts.
Yet since then, a series of economic readings have come in better than forecast. Wednesday's news that inflation was steady at 2.8% last month is the latest evidence raising hopes that the real-world impact of the Middle East war on the cost of living could be more muted than first feared.
Three months on from the start of the conflict, inflation remains well above the Bank's 2% target, and consumers have certainly endured rapid increases in the price of petrol. The cost of motor fuels in May was up an eyewatering 25% on a year ago, the Office for National Statistics (ONS) said.
Brent crude is trading below $80 a barrel, at $79.81 a barrel, the lowest since early March, amid hopes that the memorandum between the US and Iran could lead to the reopening of the Strait of Hormuz, where oil tankers are still stranded, allowing global oil flows to resume (though experts caution this would be a slow process taking months).
Thank you for reading. We'll be back tomorrow with more business and economic news. Take care! – JK
