Global Inflation & interest rates – 3rd Quarter September 2021

The US FED kept interest rates unchanged over the quarter, while continuing its asset purchase program in its efforts to provide liquidity to the market. Over the quarter investors reacted negatively amid rising global inflation and bond yields. Market participants appear to be pricing in a sooner than expected moderation to the prevailing accommodative monetary policies.

The UK recorded a relatively significant monthly increase in inflation for the month of August. The monthly inflation at +0.9% is large, though is likely to be temporary as it is predominantly due to low base effect. The annual inflation figure of +3.2% is sparking fears that the Bank of England may hike rates earlier than previously planned. The largest monthly contributor to inflation came from the transport sector, whilst the largest year-on-year contributor came from the restaurant sector as economic activity increased.