Our Views on the Markets and the Economy

Inflation: a large one-off rise on the way

Inflation is back at centre stage. And it looks set to remain there through much of 2017, as a combination of factors push prices higher. This week saw the release of the September inflation data and a rise in the year on year rate of inflation to 1% from 0.6% in August. Although this is a two year high, it is below the two per cent inflation target. Inflation was always likely to rise on an annual basis in September as falls in energy and food prices from earlier last year fell out of the comparison. Sterling's recent depreciation had very little effect on these particular inflation figures, but in coming months the full impact of a weaker pound will feed through.

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Another Stimulative Week For UK Policy

The last week has seen a number of significant developments linked to the UK policy agenda.

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UK and Global Economy Prospects

What is the state of the British economy?

For some years I have argued about the need for the UK to reposition itself in the global economy. The challenges the UK faces are not new: we don't save enough, we don't invest enough, growth is imbalanced as seen by the current account deficit and the dominance of London and all too often growth has gone hand in hand with too much of an increase in personal or government debt.

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Netwealth Portfolios Update

The Remain side cried wolf. Financial Armageddon was prophesied and did not occur. We did not have a repeat of the 2008 financial crisis. Global contagion did not materialise. Interest rates and mortgage rates rather than going up, came down.

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Economic note:

There have been two events in the last twenty four hours that warrant attention. First was the healthy UK jobs data and what they tell us about about the economy. Second were the latest Fed minutes.

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After last week's actions by the Bank of England the last seven days have brought to the fore the issue of what next for UK economic policy. Two key messages stand out: invest more in the country's infrastructure and end uncertainty by leaving the EU sooner rather than later.

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Low rates, different risks

The last week has provided clear evidence of the financial market benefit of aggressive monetary stimulus. Equities have rallied. Bond yields are low. Assets across the board have performed well.

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Monetary policy is the shock absorber for the economy. That has been the message since the financial crisis. It is a message that has been reinforced today by the Bank of England. Six weeks after the Referendum the Bank announced a significant and comprehensive policy boost.

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