Michael Saunders, a member of the Bank of England's Monetary Policy Committee, said yesterday in a seminar that the British central bank may decide to end its government bond-buying program sooner-than-expected due to the unexpected acceleration in inflation. “It may become appropriate fairly soon to withdraw some of the current monetary stimulus in order to return inflation to the 2 per cent target on a sustained basis”, adding that options could include “curtailing the current asset purchase programme — ending it in the next month or two and before the full £150bn has been purchased — and/or further monetary policy action next year.”

Data from the Office for National Statistics published this week showed inflation in the United Kingdom jumped 2.5% year-on-year in June, the highest since August 2018.

Cheap cyclical stocks still outperformed the rest. Avast led equities after the announcement that NortonLifeLock is interested in purchasing the British cybersecurity firm. The FTSE 100 ended yesterday’s session 1.1% lower, Small Caps -0.4% and the Stoxx 600 -1%.

This morning, the FTSE 100 is up 0.6% as investors take into consideration the testimony from Federal Reserve Chair Jerome Powell, who reiterated the central bank belief that this inflation is transitory and indicated that monetary policy is unlikely to be tightened any time soon.

 

Things to read:

Credit Rating upgrades hit record pace as US economy rebounds (Financial Times)

Angela Merkel’s Unfinished Business (Bloomberg)

China Buys Friends with Ports and Roads. Now the US is Trying to Compete (WSJ)