Another dramatic spike in natural gas prices appears to have ended any hopes that Europe’s inflation battle is set to ease; with financial markets now bracing for higher prices, a faster pace of interest rate hikes and a deeper economic downturn.
Just a few weeks ago, signs that inflation in the United States – which tends to lead world economic shifts – might be peaking boosted stocks and lowered government borrowing costs.
Investors bet central banks would now pay more attention to slowing economies, with a peak in the rate-hiking cycle nearing.
Instead, this week began with a forecast from U.S. Bank Citi that UK inflation would rocket to a near half-century high of 18.6% by January; a prediction that dominated British newspaper front pages.
That landed as another explosive rise in natural gas prices showed little sign of slowing; with Russia signalling further squeezes on exports and European buyers scrambling for supplies before winter.