LONDON (IT BOLTWISE) – Inflation in Britain stagnated at 3.8 percent in September, below economists’ expectations. This could pave the way for possible interest rate cuts from the Bank of England, although the chances of a cut in November are still uncertain. At the same time, Japan is planning an expansionary fiscal policy under new Prime Minister Sanae Takaichi to promote economic growth.
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British inflation stagnated at 3.8 percent in September, below economists’ expectations of 4.0 percent. This development could mark the peak of inflation, as Quilter’s Lindsay James notes in a commentary. The adjustments to employers’ social security contributions, made almost a year ago, could ease inflationary pressures by removing them from the calculation. However, investors should remain vigilant as the government should not introduce any further inflationary measures in the November Budget.
The Bank of England (BoE) could cut interest rates again before the end of 2025 due to the unexpectedly low inflation data. Peter Goves of MFS Investment Management sees subdued growth data and falling private sector wages as signs that another rate cut is possible later this year. Markets are already pricing in this possibility more as weaker data has eased some concerns about stagflation, Capital.com’s Daniela Hathorn reports.
Despite weak inflation data in September, the chances of a BoE rate cut in November are still uncertain. Suren Thiru, economic director at ICAEW, emphasizes that BoE monetary policymakers want to analyze the inflation potential of the measures announced in the national budget before cutting interest rates further. This uncertainty shows how complex the economic conditions currently are.
In Japan, however, the new Prime Minister Sanae Takaichi is planning an expansionary fiscal policy to promote economic growth. Gustav Helgesson, an economist at SEB, points out that the impact of this policy is unclear, especially given Japan’s high public debt. Takaichi has already unveiled a fiscal package that includes subsidies for electricity and gas as well as incentives for business investment. These measures could curb price pressures, but it remains to be seen how this will affect the deficit.
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