Morning Market Brief: Thursday, May 25, 2023

UK inflation dips but remains high?

Lower but still-elevated inflation in the UK likely increased the probability that the Bank of England will continue raising interest rates. Economists are divided over whether the Bank of Canada (BoC) and the US Federal Reserve Board will pause or raise rates at their next meetings. ?

• According to the UK Office for National Statistics, consumer prices rose 8.7% annually in April. The increase exceeded forecasts of 8.2% but was down from the 10.1% gain in March.
• UK food prices rose significantly by 19.2%. Higher internet bills, recreational goods and used-car prices contributed to inflation in the UK.
• In Canada, input prices eased. In contrast to a year ago, when prices accelerated after the Russia-Ukraine conflict, prices fell over 10% in April, according to Statistics Canada. However, the benefits could take a while to filter through to consumers. Based on this easing, some economists believe the BoC might continue pausing rates as it monitors inflation.
• In the US, the debt ceiling deadline is a major source of uncertainty. The estimated deadline is June 1, and concerns are growing that an agreement might not be reached in time to avoid a US default.

Interest-rate decisions by major central banks may diverge based on differing global price trends. The US debt ceiling deadline added further uncertainty in financial markets. The negative effect on Canadian and global equity markets could be significant if a missed deadline results in an extended US government shutdown. During such market volatility, dividend stocks can be a worthwhile investment and an important component of your long-term returns.?

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.