Although the focus for the UK the population will be shifting towards the general election in just over two weeks’ time, for City investors it is inflation and interest rates that will continue to steal the headlines. Inflation data released this week showed a further fall in the Consumer Price Index, hitting the Bank of England’s target of 2% for the first time in nearly 3 years. This was followed by a decision on interest rates, which remain unchanged for a tenth consecutive month, offering no assistance to Rishi Sunak ahead of July 4th.

The crux of the matter is that wage growth remains too high for the Bank’s liking. There are certainly signs that the UK labour market is cooling, with the unemployment rate nudging up to 4.4% in the 3 months to April but when coupled with high service sector inflation it’s possible that a lot might need to change for the Bank to cut rates this summer. Despite a recent profit warning from DFS highlighting weak demand for sofas, consumer spending power seemingly remains high, and this could yet trigger a further inflationary headache for rate setters.

Away from the UK, the CEO of Novo Nordisk will testify before a US Senate Committee in September, answering questions about the ‘outrageously high’ price of its diabetes and obesity drug Wegovy which currently costs $1,349 per month in the US compared to only $140 in Germany. America has often been viewed as the piggy bank of the pharmaceutical world, with prescription medicines costing significantly more than in other Western countries and although it's a complex area, it is one that does seem to be coming under increasing levels of scrutiny.

Please note that the value of investments and the income from them can go down as well as up and you may not receive back all the money invested. Past performance is not a reliable indicator of future results. Any views expressed are those of the author.

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