Despite the drop in the Pound this Friday, the FTSE 100 index has endured a second day of steep selloffs, taking its losing streak to three sessions. This puts the index on course to end the week lower after investors got spooked by the state of the global economy, rising energy prices and spiralling inflation.
In data released by the US Bureau of Labor Statistics, the headline consumer price index for May 2022 came in at 1.0%, a 0.7% increase from the previous month and more than the market consensus of 0.7%. The core figure, excluding food and energy prices, came in at 0.6% versus the market expectation of 0.5%. The figure remains unchanged from last month’s 0.6% rise. The data show that on an annualized basis, inflation is up 8.6% versus the market prediction of 8.3%. This puts US inflation at 41-year highs.
Inflationary pressure in the United Kingdom is biting hard and impacting consumers and the retail industry. Commerzbank has said that the data shows that the Fed is lagging behind the inflation curve and would need to raise rates aggressively to stem inflation.
The Bank of England (BoE) is due to meet next week to decide on the interest rates going forward. Taking a cue from what’s happening with the US inflation picture, the BoE may step on the accelerator harder than the markets expect, which is a potentially bearish trigger for the FTSE 100.
