For a while it looked like being a dead-cert for Theresa May’s Conservation Party. But the UK General Election on 8 June is looking less like a shoo-in and more like a booting out for many Tory MPs. Her once almost unassailable lead of more than 20% has been whittled down to just a handful of percentage points. But as we know, opinion polls don’t count – votes do.
Playing on the minds of some voters could be inflation expectations. At the last count, UK consumers expect prices to rise by 2.9% over the next 12 months. The fall in sterling, following the UK’s decision to leave the European, is fuelling faster cost growth as imports become pricier. But the Bank of England has its hands tied. It can’t think about raising rates as long as there is political and economic uncertainty.
There are more China Purchasing Managers’ Indices to mull over next week. The latest Caixin Manufacturing PMI number was a shock. It was the first drop in manufacturing activity since June 2016. Next week’s Caixin Services PMI will be closely watched for signs that companies in the private sector remain confident that services can continue to expand.
The European Central Bank has an interest-rate decision to make next week. In May, it kept the benchmark refinancing rate unchanged at 0% for the 10th consecutive meeting. The ECB has indicated that it intends to keep buying €60 billion of debt a month until at least the end of December. It also indicated that interest rates will stay low until “well past” the end of Quantitative Easing.
The Reserve Bank of India has an interest-rate decision to make next week too. It left its benchmark interest rate unchanged at 6.25% but said that there were upside risks to inflation. The annual inflation rate rose to 3.65% from a low of 3.17%.
Staying with central banks, the Reserve Bank of Australia is expected to keep interest rates on hold at 1.5% next week, even though inflation is running at 2.1%. In common with other developed nations, Australia’s economy is dependent on consumer spending. But it has been investments in the mining industry that has fuelled its recent economic success. It will need to tread carefully to keep economic expansion above 2%.
And finally, the Shangri-La Dialogue kicks off this weekend at the swanky hotel on Orange Grove Road. Thanks to the antics of North Korea, Kim Jong-un could displace disputes over the South China Sea as the focus of attention. Australia’s outspoken Prime Minister, Malcolm Turnbull will deliver the keynote speech. I wonder what he will say.
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