How big a threat is inflation?

Jerome Powell and his Federal Reserve (Fed) colleagues decided to cut the Fed Funds rate by 25bp to 3.75-4% at last week’s policy meeting, marking 150bp of cuts since the cycle began in September 2024.

Amid tariffs, bankruptcies, and uncertainty, credit fundamentals remain strong. Elevated yields and solid corporate balance sheets favour income-focused fixed income strategies over government bonds, even as volatility persists.

Oil prices have been gathering headlines in the last few weeks. After falling below the $60 per barrel mark, the West Texas Intermediate price (WTI) bounced back strongly as a result of fresh sanctions announced against the two Russian giants, Lukoil and Rosneft.

As we begin the final stretch of 2025, market conditions appear challenging. Inflation remains sticky across a range of economies, preventing major central banks from enacting rapid rate cuts to support GDP growth.

Amidst an economic data blackout caused by the US government shutdown, markets received a bit of positive news on Friday with the release of the US CPI report which showed consumer prices in September increased at a slower pace than expected.

France’s chronic government paralysis repeatedly created headlines this month, and fixed income markets are rightly worried about the sustainability of French government borrowing levels. Meanwhile, forecasts of a £50bn blackhole in the UK’s public finances are keeping gilt yields elevated and have made this November’s UK Budget a potential flashpoint.