Data for the US personal consumption expenditure price index (PCE) was recorded at 2,5% from 2,6% the previous month, with the annual rate for core PCE (the Fed’s preferred measure of inflation) remaining steady at 2,6% for the third month.

While the US Federal Reserve (US Fed) kept interest rates on hold once again at the end of July, it has emphasised its dual mandate of price stability and full employment, with the latter showing more strain of late. All eyes (and ears) were on the annual gathering of central bankers in Jackson Hole, Wyoming. Federal Reserve Chair, Jerome Powell, delivered a dovish message, suggesting the time has arrived for interest rate cuts. With weaker labour market data recorded over the month, markets repriced for the possibility of more meaningful interest rate action from the US Fed at the September meeting.

Inflation in the UK remained steady in June at 2,0% y-o-y, at the inflation target. While the decision was close with a 5:4 split, the backdrop of cooling inflation saw the Bank of England (BoE) cut interest rates by 25bps, the first time since 2020.

The Bank of Japan (BoJ) increased interest rates “to around 25bps” and signalled further tightening of monetary policy after a prolonged period of low interest rates. This prompted an unwind in carry trade positions, which relied on the cheap Japanese Yen borrowing cost to fund other higher yielding assets.

Despite the brutal sell off at the start of the month, risk assets rebounded swiftly on the prospect of lower interest rate and took comfort from decent second quarter earnings results. Developed market equities (2,7%) outperformed emerging market counterparts, with the MSCI Emerging Markets index returning 1,6%. 
 

Want to know more?
Here's what to do:  

• Contact your wealth manager or stockbroker.
• To find out more about our investment offering, click here.
• If you're interested in what we can offer you, we would love to hear from you. You can contact us on 0800 111 263, or complete an online contact form.