As BoE and Fed get set to meet what next for rate cuts?

1) UK CPI (May) – 18/06 – Having seen the various changes to tax rates, as well as increase in bills that came into effect in April it was no surprise to see a large jump in the headline rate of inflation to 3.5% from 2.6%, a figure that was way above what many had forecast. Core CPI also rose sharply to 3.8%, however as it turns out the headline CPI number was a little too high given a miscalculation on the part of the ONS of 0.1% due to an error in the way car tax data was collected. Is there no end to the incompetence of this public body? If it’s not problems with unemployment data, it’s the trade numbers, and if it’s not that it’s PPI and now CPI. As we look to the May numbers the hope is that this will be the high point for the year and that price pressures will slow from here on in. Of course, that assumes in response to these increases in tax and wage rates businesses won’t feel compelled to pass some of these on to the consumer in an attempt to offset some of the hit to their profit margins. The only silver lining in the April inflation numbers was a slowdown in energy inflation which has continued to fall, albeit at a slower pace, however the one to watch will be services inflation, which rose to 5.4%, an 8-month high, from 4.7%, in the wake of what we saw in April, and how quickly that comes down  

2) Federal Reserve rate meeting – 18/06 – No changes are expected from the Federal Reserve this week when it comes to interest rate policy which will inevitably prompt the usual social media tweet storm from the US President that the FOMC needs to cut rates aggressively and that they are acting too slowly when it comes to rate policy. Unfortunately for President Trump this policy is likely to prove counterproductive as it is likely to make the FOMC less compliant when it comes to setting policy lest they be accused of bowing to political pressure. The reality is the continuing resilience of the US economy means that there appears little need to rush given that payroll growth while slowing is still positive, and jobless claims data is also steady at 1.9m a week. Vacancy rates are also still high and headline inflation, while slowing, is still above the Fed’s 2% target, despite the weaker reading in the May monthly PPI number. Recent comments from various Fed officials also suggest that they are in a rush to start reducing the Fed Funds rate. In recent comments, Chicago Fed member Austan Goolsbee who tends to lean more dovish said that while the slowdown in April inflation was welcome, he would prefer to see “a lot” more like it before considering further cuts. With so much uncertainty over whether current, as well as newly threatened tariff rates kick in, and now Israel's attack on Iran's military infrastructure, it is understandable that the central bank is acting in the cautious manner that it is. Goolsbee said the Fed will want to see what happens at the end of the 90-day pause in July when it hopes the picture will become clearer on the prices front.  

3) Bank of England rate meeting – 19/06 – Having seen a sharp rise in headline CPI in April the chances of another rate cut in the short term diminished considerably, although the bar was already high given how the last meeting’s decision played out, and the splits on the MPC. While 2 members wanted to see a bigger cut of 50bps, (Swathi Dhingra and Alan Taylor, instead of the 25bps agreed, this was negated by two members, who voted to keep rates where they were, with Catherine Mann, having previously called for a 50bps cut in February, voting to maintain the status quo, along with chief economist Huw Pill. Mann’s attempts to justify her decision to hold rates merely served to create more confusion with her comments about a resilient labour market at odds with the central bank’s own regional surveys, which showed hiring was slowing sharply. While it would be easy to characterise these splits as the MPC having little clear idea of how the UK economy is doing, and many people are doing so, I would disagree to a point. I think that having such divergences is preferable to the past where groupthink became the norm, and has served to create some of the problems we are seeing today. The central banks job isn’t being made any easier because of the data issues plaguing the Office of National Statistics which appears to be well on the way to becoming a national embarrassment. No changes in policy are expected from this week’s meeting as policymakers digest this week’s May inflation numbers as well as last week’s wages and unemployment data, which saw the unemployment rate rise to a new 4-year high of 4.6%, while the UK economy saw a -0.3% contraction in April. Today's surge in oil prices, due to Israel's attack on Iran, will also complicate the inflation picture, if sustained, over the next few days. 

4) US retail sales (May) – 17/06 – In spite of concerns about the inflationary effects that the new US government’s tariffs have had on consumer confidence in recent months, actual spending appears to have held up well, along with the labour market. Despite a cold weather-related slowdown in January, which saw retail sales dip by -0.4%, we’ve seen a run of positive months since then, with gains of 0.3%, 0.5% and 0.1% in April. The latest April personal spending numbers reflected the slowdown seen in April retail sales, however it was also noteworthy that personal income rose 0.8% at the same time, which may reflect that consumers were holding back a little given that April also saw a significant amount of market turmoil at the start of the month with the announcement of the so-called “Liberation Day” tariffs. Despite President Trump’s continued calls for big rate cuts from the Fed it’s not immediately obvious that the US economy needs them given the underlying resilience of the hard data, even if the soft data paints a more cautious story. 

5) UK Retail sales (May) – 20/06 – So far this year the UK consumer has been on a bit of a spending binge, flying in the face of the overriding pessimism that characterised the start of the year. Strong gains of 1.7%, 1%, 0.4% and 1.2% in April saw the UK economy start the year very much on the front foot, with the latest results from UK retailers confirming a reasonably strong start to 2025. The strong performance in April was even more surprising given that we also saw large jumps in taxes and utility bills well above the rate of inflation, although the timing of Easter as well as the better weather will have undoubtedly helped. The risk is that this could be as good as it gets as consumers retrench in the face of these fiscal headwinds, and with unemployment starting to push higher, rising to 4-year highs earlier this month, there is the very real possibility that it’s downhill from here.      

6) Ashtead Group FY 25 – 17/06 – One of a number of companies which announced it would be moving its primary listing to the US at the end of last year, and it’s unlikely to be the last. This UK business does about 80% of its business in the US under the name of Sunbelt Rentals, so it’s perhaps not hard to understand why they have decided to do this. Nonetheless it is still a blow to the London market and appears to have sparked a trend that has continued unto this year. With the move expected to take place within the next 12 months the company will still retain its UK listing, it just won’t be in the FTSE. At its most recent set of numbers in March, the company reported a 3% decline in Q3 revenue to $2.57bn, although on a year-to-date basis we did see a modest increase. Rental revenue saw a 5% increase to $7.6bn, although operating profits did see a 7% decline on the quarter and a 3% decline year to date, due to higher costs. On a regional basis the US made up the bulk of its revenue and income, with Canada and the UK making up a combined $1.1bn over the 9 months to date. On the outlook the company said that it was trading in line with expectations and expects to deliver group rental revenue growth of between 3% to 5%.    

7) AO World FY 25 – 18/06 – Having been one of the bigger pandemic winners, online electoral retailer AO World saw its shares soar to over 400p at one point, before crashing back down to earth with a bump becoming a victim of its own success in the process. Sinking to as low as 35p at one point the shares have slowly recovered with Frasers Group gradually acquiring a stake over the last few years, a stake which currently sits at just above 25%. With the shares over 20% below their 2024 peaks of 120p it’s reasonable to ask what happens next with a company that competes with the likes of Curry’s, and by and large according to its most recent filing is trading ahead of expectations. In March AO World said that adjusted pre-tax profit is expected to be at the top end of the £39 to £44m range. It said that B2C revenues are expected to increase by 12% while estimated LFL group revenues are expected to increase by 7% to £1.1bn. The acquisition of musicMagpie is expected to add £30m of revenue, adding a modest loss into the FY25 results. There should be greater clarity on how much this is likely to be with the risk of a potential impairment of up to £22m. For 2026 the expectation is for another year of double-digit B2C revenue growth.