October Market Commentary 2022

Q3 GDP data released in October was better than expected. However, as high inflation and higher interest rates impact consumers and businesses, expectations are that growth in the major advanced economies will slow considerably in 2023, with many European economies already flirting with recession. The labour market remains resilient, however, with job creation still positive despite the mounting  headwinds. 

Headline Consumer Price Index (CPI) inflation remains high at 10.1% in the UK. There is also evidence of inflation pressures becoming even more long term, as tight labour markets place upwards pressure on wages, causing more concern for central banks. Inflation is forecast to moderate in 2023 but remain well above target in most major economies. Against this backdrop, the European Central Bank raised its key interest rate by 0.75% p.a. in October, with the US Federal Reserve and the Bank of England (BoE) delivering similar increases in the first week of November. Further rate rises are expected but UK interest rate expectations have fallen back from recent highs touched in the wake of the “mini” budget, although the base rate is still expected to reach over 4.5% p.a. in 2023.

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