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UK inflation surged to 3.2% in August, its highest level in nine years, though much of the upward pressures are likely to prove temporary.
Bank of England officials were relatively optimistic on the economy this week, as they remain focused on inflation, and how the jobs market performs once the furlough scheme ends at the end of this month.
Market focus today is on the critical US jobs data and how this may affect the timing of US monetary policy action.
Market focus today is on the Jackson Hole economic forum, with US central bank chair Jerome Powell speaking later.
UK Job vacancies hit a record high of 953,000 in the three months to July.
The UK economy grew by 4.8% in the second quarter as lockdown restrictions were gradually eased and the recovery gained momentum.
The Bank of England kept monetary policy on hold as widely expected but said interest rates may need to increase over the forecast period, and they will begin unwinding QE once the benchmark rate reaches 0.5%.
The Bank of England meet next week and are likely to keep monetary policy unchanged, as they balance higher inflation and the economy generally recovering strongly, against the huge risks the virus continues to pose.
Growing concerns on the economic fallout from the spread of the Delta variant are weighing heavily on market sentiment, driving the dollar higher and hitting global equity markets.
UK inflation jumped above the Bank of England’s target in June, hitting 2.5%, its highest level in almost three years.
US equities hit fresh all-time highs again this week on the stronger economic outlook.
The Bank of England governor insisted yesterday they would not be overreacting to growing inflationary pressures, which he expects to be temporary, despite outgoing committee member Haldane predicting that inflation would be close to 4% by the end of this year.
Ruth Lea CBE
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