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Astute Market Overview - 20th December 2022


“When shall we three meet again? In thunder, lightning or in rain?”.

Well, in fact, snow and ice were the backdrop for the UK, as we had interest rate decisions from three central bank meetings (the US, UK and Eurozone) along with inflation data releases from each region, all in the last week.

Welcome to our Astute Market Overview of the last week.

At the top of the week, it appeared that those who had been naughty this year may well have had a reprieve, given that the coal in your stocking could possibly be put to better use. That is, better use in a Drax power station: given the cold weather last week, the National Grid ordered two coal plants to ready themselves in case they were needed to meet energy demand. The National Grid explained that this was just a precaution which, in fact, wasn’t need in the end: later in the day, the National Grid cancelled the request.

In other news, data for November’s inflation was released in the US, the UK and Eurozone, and all three central banks announced interest rate increases. There were no major surprises here: inflation in November for all three regions had cooled slightly when compared to the previous month.

All three central banks also increased their key interest rates by 0.5%. The regions have all experienced high levels of inflation, however the European Central Bank (ECB) seem to be further away from pausing rate hikes. Given that the ECB has implemented fewer interest rate hikes this year when compared to the other central banks (and they started in negative territory), it is no surprise that ECB President, Christine Lagarde, said they still have “significantly further” to go.

In the UK, interest rate decisions are voted for by a nine-person Monetary Policy Committee, and at last week’s meeting, the vote was split three ways: the majority of six voted for a 0.5% increase, one member voted for a large increase of 0.75%, and two members voted for no increase at all.

The base rate in the UK now sits at 3.5%, and is likely to increase further to tackle inflation. Whilst an increase in interest rates is typically seen as good news for those with savings, and bad news for those with debt, many new rates for fixed rate mortgages have actually been coming down slightly and settling since October, following a Mini Budget that caused mortgage rates to spike, and some providers to withdraw mortgages from the market.

We’ll take a short break from publishing the Astute Market Overview over the Christmas period, but we’ll be back in the new year. Until then, we’ll looking out for:

  • An interest rate decision from the Bank of Japan, and Japanese CPI
  • US Q3 GDP, and
  • Chinese PMI

See you in the new year.

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