Danni Hewson, AJ Bell financial analyst, comments on the latest policy decision from US central bankers:
“Change is upon us. Whilst the Fed hasn’t altered interest rates it is going to start tapering bond buying, a tacit admission that inflation, though still expected to be transitory, might well hang around a little longer than Goldilocks might like. Covid has certainly created an intriguing proposition for central banks to wrestle with. As economies and consumers get back in the saddle, supply chains have found the starting gates have malfunctioned a bit. Items that need to be at point A are stuck at point B and all that cash that’s been squirreled away means people have been broadly happy to stump up a bit more than they normally would.
“But this change was not exactly a surprise, in fact investors would have been more surprised if the Fed hadn’t swung this way and Wall Street has pretty much taken things in its stride. In contrast London markets had a pretty lacklustre day, pricing in a touch more jeopardy. Will the Bank of England find its inner hawk when the monetary policy committee meets tomorrow, or will it follow the same path that’s been trodden by its US brethren?
“Whilst any rate rise in the UK would be modest, just the move upwards would be a jolt. There’s been column inches after column inches written about how even a tiny increase could affect consumers already trying to cope with a barrage of price rises that can’t be sidestepped. The cost of living has a higher price tag than many households would like and there are nine people who are weighing up whether the answer to the question is to move or not to move.”
