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QuotedData’s Economic and Political Monthly Roundup – September 2024

As inflation recedes across the bulk of the world’s developed economies, all eyes turn to the path of interest rates and the speed with which these come down in the coming months. Several major central banks have already cut their interest rate, including the Bank of England (BoE) which reduced its base rate to 5% on 5 August, the first reduction in over four years.

While markets generally view these cuts as a positive, it’s important to consider the fundamentals driving these decisions. In the context of the UK, falling inflation and better than expected growth has allowed the BoE a degree of flexibility to cut on its own terms. In contrast, US cuts appear predicated on the strength of its labour market, which has weakened considerably in recent months, with US unemployment hitting its highest level since October 2021.

Falling interest rates in the UK are also set against a backdrop of historically low equity market valuations, which stands in contrast to the US.