Let’s talk about inflation baby

It’s the financial story of the year as far as I’m concerned, so let’s talk about it some more for September.

Covid19, meme stocks, the rise of crypto, Buy Now Pay Later, vaccines – just some of the big news ‘trends’ we’ve witnessed so far this year in the news. Can you think of any others?

These trends are of course painted with very broad brush strokes and often quite reductive but it is helpful to think in trends sometimes. These are the news stories that don’t just happen once but come back to us again and again from new angles.

For me (as a secret macro nerd) the biggest one has been inflation. It’s coloured all our discussions from economic reopening to cryptocurrency usefulness and shortages of HGV drivers.

The prevailing narrative, in the UK and US at least, is that inflation is going up. Quickly. September is shaping up to be a veritable season finale for inflation.

At the beginning of the month (1 September) the Bank of England has a new member joining the Monetary Policy Committee. Catherine Mann replaces Gertjan Vlieghe on the MPC. While no guarantee to cause a tectonic shift in policy, a new voice is arriving at an interesting moment.

Rate decisions come in quick succession this month too, with the US Federal Reserve on 22 September quickly followed by the Bank of England on 23 September. It is unlikely they are actually going to do anything, but the consensus is that if the winds of change are going to blow through the ranks of the rate setters, now is the time when they’ll do it. We shall see.

In UK terms there is also an interesting inflection point in economic and political terms to contend with. The furlough scheme which has supported so many jobs since March 2020 is set to close on 30 September. While the employment rebound has been good overall, there is absolutely no precedence for what the withdrawal of government support like this could do.

On the same day (30 September) the government is also ending its temporary 5% VAT regime for travel and hospitality firms. The stamp duty holiday also finishes its wind down with the end of the relief for homes up to £250,000 in value.

September is certainly going to be an interesting month. It hasn’t exactly been a quiet summer, and as many return to work from a well-earned break the biggest trends in the news are unlikely to quieten down.

All the best from everyone here at Capital City Media, MRM and Mouthy Money, wishing you an engaging start to the Autumn.