Insights

Government bonds under pressure again as inflation refuses to budge

20 October 2023

This week neatly illustrates the problem facing the Bank of England. Inflation remains stubbornly high and wage growth continues at near record levels, but consumer confidence and spending have contracted sharply. It is usually good to treat a single month’s data with a healthy dose of scepticism, however, the monthly CPI reading is now stuck just under 7% where it has been since July. High interest rates are now having the restrictive effects intended on consumer activity, but inflation seems to have stopped reacting to the downward pressure. The bank’s choice is stark; is the priority inflation or economic growth?