- Inflation has fallen in all the major economies and central banks have been able to keep policy on hold.
- But core inflation remains well above 2% targets and there’s uncertainty around whether downward trends will continue.
- The UK has lagged other countries in terms of falling inflation, but we expect the gap to narrow significantly in upcoming data.
- Unemployment looks set to rise in the months ahead – we believe the Sahm rule could be triggered in early 2024 in the US.
- Easing wage inflation bodes well for core inflation in the UK and unemployment in Europe will likely rise from here.
- The path to lower interest rates from key central banks seems clearer and this will be good news for bonds and equities.