Inflation Angst Resurfaces

• Investor hopes that global inflation is finally on the wane or that central banks can relax were thrown a curve ball by Britain on Wednesday even as oil prices continued to ebb. With markets awaiting minutes from last month's U.S. Federal Reserve meeting on Wednesday, double-digit UK inflation readings for July cut across the global 'peak inflation' narrative and suggest central banks may have to do more to control it.
• UK consumer price rises topped 10% for the first time since 1982 - well ahead of forecasts, before fresh energy price hikes domestically and adding pressure for bigger Bank of England interest rate rises. While UK inflation had already been forecast to rise to 13% later this year, the strength of the price moves last month was jarring.
• The fresh angst sent 2-year UK government bond yields to their highest in 14 years and spurred interest rate markets around the world, even in the United States. New Zealand's central bank also announced its fourth consecutive half-point interest rate rise on Wednesday, with a promise of more rate rises to come there.
• The British surprise adds to a series of conflicting signals on global inflation and growth - especially from the United States. Tuesday's U.S. soundings included dire housebuilding data for July but rapid growth in manufacturing and upbeat earnings readouts from retailers such as Walmart, whose stock jumped 4% as it upped its outlook while flagging deep discounting to clear inventories.

(Source: Reuters)