Services inflation dents rate cut outlook
07:39 , Graeme Evans
The flat inflation figure of 2.2% reflected some downward pressure in food and fuel prices, offset by a large rise in airfares inflation to 11.9% in August.
Core inflation moved up to 3.6% and services rebounded to 5.6% in August.
Capital Economics said this was still too high for the Bank of England’s liking, adding that headline CPI is likely to rise to 2.9% in November due to higher utility prices before it falls back towards 2% in mid-2025.
The Bank of England cut its base rate for the first time in the cycle last month, with no change from 5% likely at this week’s monetary policy meeting.
The consultancy added: “Overall, a pause on interest rate cuts was already expected tomorrow and today’s release cements that view.
“We continue to assume the next 0.25% interest rate cut will take place in November and that rates will be cut at alternative BoE meetings until June.”
Legal & General sells CALA Group in a deal worth £1.35 billion
07:32 , Michael Hunter
FTSE 100 insurer Legal & General announced the sale today of CALA Group, a house builder it has owned entirely since 2018.
L&G said the deal was worth almost £1.4 billion including debt and would result in ncash proceeds of £1.16 billion. It added that £500 million will be paid upfront, with “the remaining consideration being paid over the next five years”.
It added that “the disposal reflects L&G’s disciplined approach to capital allocation” and proceeds from the disposal “to reinvest in the group”.
CALA’s new owner will be private equity funds run by Sixth Street Partners and Patron Capital.
Wall Street divided over scale of US rate cut
07:16 , Graeme Evans
The outcome of tonight’s Federal Reserve decision continues to divide Wall Street, with futures currently pricing in a 69% chance of a 0.5% cut.
Given this level of uncertainty, there’s likely to be a strong market reaction whatever the decision.
Deutsche Bank said this morning: “You’d have to go back over 15 years to find such an uncertain situation this close to the decision. A lot of money will be made and lost today.”
If the Fed opts for the larger cut, it wouldn’t be the first time that they’ve begun a cycle of rate cuts with a larger move. When they did so in 2001 and 2007, recession followed within 3-4 months.
Inflation unchanged at 2.2% in August
07:08 , Jonathan Prynn
The headline rate of inflation held steady at 2.2% last month, official figures reveal.
The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) rose in line with City expectations but still slightly ahead of the Bank of England’s 2% target.
However, the closely watched services sector CPI – seen as a key measure of domestic inflation – increased from 5.7% in July to 5.9% in August.
That will make it less likely that the Bank will cut rates again on Thursday.
Markets drift ahead of Federal Reserve interest rate cut
07:04 , Graeme Evans
Leading US benchmarks finished broadly unchanged last night as traders sat on the sidelines ahead of tonight’s Federal Reserve interest rate decision.
The central bank is expected to loosen policy for the first time in four years, with Wall Street’s focus on whether the cut will be 0.25% or 0.5%.
The FTSE 100 index rose 0.4% yesterday and is forecast to open about 0.3% lower at 8295 this morning.
