Market Update

Global equity markets experienced a brief surge following the announcement of the US CPI inflation dropping below 5% for the first time since April 2021. However, by the week's end, these gains were eroded due to concerns of an impending recession.
In the US, there was a noticeable spike in initial jobless claims, reaching 264,000 — this refers to individuals filing their first claim for unemployment benefits. This figure is the highest since late October 2021, shedding light on the Fed's eagerness to halt their trajectory of increasing interest rates.
Meanwhile, in the UK, the BoE, on 11 May 2023, opted for a 0.25% rise in interest rates, pushing it to 4.5%. While this hike was anticipated, the accompanying guidance raised eyebrows.
The decision-making at the BoE never ceases to surprise us. Even as they maintain that inflation will significantly fall below their 2% target in two years, they signaled a continued uptrend in UK interest rates. Simultaneously, they substantially revised their previous economic growth predictions, projecting a 2.25% increase by mid-2026.
It leads one to wonder about their personal financial situations, as many are bracing for financial strain. As we've highlighted before, numerous two-year fixed-rate mortgages are nearing their end, a consequence of the flurry to capitalize on the stamp duty break two years prior. Present-day mortgage rates far exceed those from two years ago. With this anticipated increase in monthly repayments, disposable incomes are bound to shrink, casting doubts on the possibility of sustained economic growth, especially when consumers contribute to about 60% of the UK's economy.
To further the point, the recent UK GDP data, released on 12 May 2023, indicated a contraction of 0.3% for March. So much for the BoE's optimistic growth projections!