Week ahead: Inflation expectations numbers top City’s agenda 

UK Economy Shrank Last Quarter, According To New Gov. Figures
Last week, London’s premier FTSE 100 index climbed nearly one per cent to 7,556.23 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, tumbled 0.93 per cent to 19,363.28 points (Photo by Dan Kitwood/Getty Images)

Investors this week will be eyeing fresh data revealing how long households think high inflation will stick around in the UK for clues on the size of the Bank of England’s next interest rate rise.

Last week, London’s premier FTSE 100 index climbed nearly one per cent to 7,556.23 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, tumbled 0.93 per cent to 19,363.28 points.

FTSE 100 finished higher last week

A series of data releases this week will provide more evidence on how the British economy is coping with high inflation.
Source: TradingView

Several key economic data points released this week will provide further evidence on how badly the UK economy is faring amid high inflation.

New Bank of England numbers on Friday are expected to show Brits’ long term inflation expectations nudging higher to 3.3 per cent, driven by households betting slightly food and energy prices could be here to stay.

The Bank is concerned the historic inflation surge this year, now running at 41 year high of 11.1 per cent, will result in households and businesses raising their expectations for future price rises, sparking an inflationary feedback loop where workers demand higher wages and companies lift prices.

Sanjay Raja, senior economist at Deutsche Bank, reckons the Bank will opt for a 50 basis point rise at its next meeting on 15 December, lower than last month’s 75 basis point jump.

Final composite PMIs out tomorrow could be revised down from an earlier estimate due to  “households and businesses grappl[ing] with still rising inflation and rising debt servicing costs,” he added.

Halifax’s latest house price index on Wednesday is anticipated to chime Nationwide’s recent figures and reveal monthly price growth reversing.

US producer inflation numbers on Friday could jolt Wall Street higher if they show further signs of price pressures easing, cementing hopes the US Federal Reserve will ease off its aggressive rate hike drive to 50 basis points.