Key Takeaways
- Bank of England (BoE) Monetary Policy Committee member Megan Greene stated that the most salient global risk stems from financial markets and emphasized that policy "must bear down if expectations are elevated" to combat persistent inflation.
- Greene highlighted that while UK inflation has "stabilized," business CPI expectations are rising and elevated, with inflation outcomes actively feeding into these expectations.
- Preliminary results from the BoE Agents' Survey indicate pay settlements of around 3.5%, suggesting a potential upward shift in wage-setting behavior, despite some encouraging signs in wage growth and services inflation.
- In the U.S., layoff notices surged in October to 39,006, marking the second-highest level since the 2020 crisis and a 160% increase in just two months, signaling a recessionary pace.
- America's homeowner population has stopped growing for the first time in nearly a decade, according to Redfin, reflecting challenges from rising home prices, high mortgage rates, and economic uncertainty.
Bank of England (BoE) Monetary Policy Committee member Megan Greene has issued a stark warning regarding the global economic landscape, identifying financial markets as the most significant global risk. Speaking on the current economic climate, Greene underscored the necessity for monetary policy to "bear down" if inflation expectations become elevated, signaling a continued hawkish stance.
Greene noted that while UK inflation has "stabilized," there is a significant concern around "second-round effects" feeding into price pressures. Business CPI expectations are reportedly rising and remain elevated, with current inflation outcomes directly influencing these expectations. She also highlighted that CPI expectations are "at the top of the bands we can explain."
On the labor front, Greene indicated that vacancies have stabilized, but consumption remains weak. Despite some "encouraging" signs in services inflation coming down and evidence on wage growth, preliminary results from the BoE Agents' Survey suggest that pay settlements are averaging around 3.5% for next year. This figure is higher than what is consistent with the BoE's 2% inflation target and may be attributed to an upward shift in wage-setting behavior. Greene also observed that "slack has opened up in the labor market and the economy," and expects this slack to increase, aligning with a "benign" BoE projection.
Beyond the UK, the U.S. labor market is showing signs of significant strain. Layoff notices surged to 39,006 in October, marking the second-highest total since the 2020 crisis and a substantial 160% increase in just two months. This pace is described as recessionary, raising concerns about the broader economic outlook.
Furthermore, the American housing market is experiencing a notable shift, with America’s homeowner population stopping its growth for the first time in nearly a decade, according to Redfin. This trend is driven by a combination of rising home prices, high mortgage rates, and general economic uncertainty, making homeownership increasingly challenging.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.