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U.K. Rate Hike, Trump's Pick For Fed Chair And U.S. October Jobs Report

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On the latest edition of Market Week in Review, Consulting Director Todd LaFountaine chatted with Chief Investment Strategist Erik Ristuben about the recent hike in interest rates in the U.K., President Trump's nomination of Jerome Powell to lead the U.S. Federal Reserve and the latest numbers from the U.S. jobs report for October.

Citing inflation concerns, Bank of England hikes interest rates

The Bank of England's Nov. 2 decision to hike the base interest rate from 0.25% to 0.5% was "a dovish raise," Ristuben said - as members of the bank's monetary policy committee indicated that if they were to do so again, it would be a very gradual process. In Ristuben and the team of Russell Investments strategists' opinion, this was likely a "one-and-done" hike. "One of the bank's principal reasons for raising rates was due to higher-than-expected inflation - which has surged ahead of wage growth in recent months," he said. However, Ristuben noted that inflation in the U.K. is mainly tied to the devaluation of the British pound, which he expects to be transitory.

"Consumers have been the strength of the British economy in the post-Brexit world," Ristuben remarked - "so now the question becomes, are they going to be able to continue exhibiting that kind of strength when cash is more expensive?" He predicts that the net result of the hike will be a downturn in economic growth, which would likely prevent the central bank from raising rates again anytime soon.

Markets unmoved after Trump taps Powell to be next Fed chair

Turning to the U.S., Ristuben noted that President Donald Trump's recent nomination of Jerome Powell to serve as the next chair of the Federal Reserve (the Fed) caused very little reaction in markets. Why? Markets hate uncertainty more than anything else, he explained - and in choosing Powell, Trump chose someone whose viewpoints

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Russell Investments is a leading global investment solutions firm with $326.9 billion in assets under management (as of 3/31/2021) and $2.8 trillion in assets under advisement (as of 12/31/2020) for clients in 32 countries, The firm provides a wide range of investment capabilities to institutional investors, financial intermediaries, and individual investors around the world. Building on an 85-year legacy of continuous innovation to deliver exceptional value to clients, Russell Investments works every day to improve people’s financial security. Headquartered in Seattle, Washington, Russell Investments has offices in 19 cities around the world, including in New York, London, Tokyo, and Shanghai.  Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners, Russell Investments' management and Hamilton Lane Incorporated.Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.

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