In life we generally want to be right. This is why you may hear traders framing their trading success by saying they won nine out of the last 10 trades, or that they have a 90% success rate. However, this is something that you need to be weary of, having lots of winning trades does not necessarily mean that you will be a profitable trader in the long run.

Here, Simon Garner, Trading Floor Manager at Learn to Trade, lists five steps to understanding how important it is to be right when trading through your trade expectancy in order to help set yourself up for success.

1. Quality over quantity: understanding reward-to-risk ratios

As traders, the risk/reward ratio is something that we need to pay close attention to. It essentially refers to how much exposure you have in the market compared to what you stand to gain. As traders we will have particular criteria that must be met in order to take a position, which will be set out according to our trading plan. Whilst this means there will only be a limited number or opportunities each month, it means each trade is carefully thought through.

2. Mental expectations: finding your winning percentage

This is something that many new traders have an unrealistic expectation about. Many expect a 90-100 per cent win ratio and that they will identify trades that are a ‘sure thing’. In reality this is not the case. Many profitable traders will in fact have win ratios of 60-70%, which is why having the ability to find opportunities that provide the best risk / reward ratio is so important.

3. Knowing your real ratio

While being right more often than not certainly helps, to truly determine success you need to consider whether you’re making any net long-term profit. This can be shown through your average reward-to-risk ratio.

To illustrate this, imagine two traders: Sarah and Mike. Both have placed 100 trades and started with the same amount of money in their trading accounts. Mike has won 75 trades and lost 25, and Sarah 30 and 70 respectively. When Mike is right he makes a profit of £100 per trade on average, but when he’s wrong he makes an average loss of £300. This means that Mike’s reward-to-risk ratio is 1:3. Comparatively, when Sarah is right she makes £300 on average per trade and when she’s wrong she loses on average £100. This means Sarah’s reward-to-risk is 3:1.

4. Finding your trade expectancy

To really understand how strategies stack up against each other, we need to take into consideration the two things: firstly, how frequently we have winning trades, and secondly, how much is gained or lost with each trade.

The solution is called trading expectancy, and it is calculated by combining your risk / reward ratio and your winning percentage. Trade expectancy essentially tells us how much we stand to gain or lose for every pound risked. It is expressed in the following way:

Expectancy = (average gain x probability of gain) – (average loss x probability of loss). We can make this a bit clearer using Mike and Sarah’s results here:

Mike’s expectancy per trade = (£100 win x 0.75) – (£300 loss x 0.25) = £0

Sarah’s expectancy per trade = (£300 win x 0.3) – (£100 x 0.70 loss) = £20

What this tells us is that over the long run Mike is breaking even with each trade despite winning 75% of the time. For Mike’s strategy to become profitable he either needs to win more often and/or reduce his risk per trade. Sarah’s expectancy tells us that she is making an average £20 per trade in the long run, even though she is winning just 30% of her trades. Her reward-to-risk strategy means that she can be wrong much more frequently than Mike, but still make a profit overall.

5. Refine & repeat

Your trade expectancy can improve or worsen depending on trading conditions and whether you stick to your trading plan, nevertheless, expectancy is a good benchmark. You could also think of expectancy as how much you can theoretically expect to get paid for each trade you take over time. As such it is important to constantly track as you mature as a trader. Patience, consistency and education are the most important factors when it comes to trading and compounding interest.

As we all know, it’s impossible to always be right when trading forex. However, figuring out your expectancy helps shift focus away from being right per trade to instead how right you are overall.

Towards the end of July the price of gold steadied after US President Donald Trump who criticized the Federal Reserve's interest rate tightening policy. In more recent events, Trump doubled tariffs on Turkey’s steel and aluminium.

In the US gold prices have hit a 17-month low, falling down to the $1,200 mark and are increasingly trading lower. In other countries the price of gold continues to rise.

Daniel Marburger, Managing Director at Coininvest told Finance Monthly: “Gold prices soar in times of uncertainty, which is why many people expected gold price to fall once Trump was elected.

“Throughout his presidency, Trump has proved to be a controversial character and we’ve seen movement in gold price reflect this.

“He has had a positive impact on the value of the US dollar which usually lowers the gold price, however, current trade wars Trump has started with the EU, Canada and China are offsetting this, slowing the decline.  

“High interest rates make gold a less attractive investment, unlike other investments it doesn’t offer interest. It will be interesting to see how the US president’s decisions will impact the value of gold throughout the rest of his presidency – especially as we approach the mid-term elections in November.”

After some time of speculation, the Bank of England confirmed interest rate hike last week, by 0.25%. Already we have seen some banks act fast in passing this hike onto the customer, in particular mortgage buyers, as opposed to savings rates.

In this week’s Your Thoughts, Finance Monthly has collated several expert comments from UK based professionals with expert knowledge on this topic.

Richard Haymes, Head of Financial Difficulties, TDX Group:

While an interest rate rise is positive news for people living on their savings income, or holding pensions and investments, it may prove to be the tipping point for those in financial difficulty or struggling with debt.

Individual Voluntary Arrangements (IVAs) have reached record levels and we expect the rate of monthly IVAs and Trust Deeds to grow by around 17% this year. A rise in interest rates will make it much harder for people in these arrangements, and there’s a risk they’ll default on their strict requirements.

A large portion of people who are in personal insolvency hold a mortgage (over a fifth according to personal insolvency practice Creditfix), and a rate rise will obviously increase their mortgage repayments. Due to these people’s unfavourable credit circumstances, it’s likely that majority of mortgage holders in insolvency are tied to variable mortgage products, leaving them particularly vulnerable to a higher interest environment.

Holders of a £250,000 mortgage will have to absorb a monthly repayment increase of £31* as a result of this 0.25% hike. Modest as it may appear to many, for people in structured debt management plans or IVAs this could have a very significant impact, even resulting in their debt solution becoming defunct or in need of renegotiation.

Jon Ostler, UK CEO, finder.com:

This rate rise decision comes as no surprise. Our panel of nine leading economists unanimously predicted that the interest rate would rise by 25 base points, and this is a positive sign that the economy is growing stronger.

It’s particularly good news for savers, who have suffered ultra-low interest rates for the past decade. They can expect a rise to their savings, albeit a small one. Now is a good time to consider switching your banking products, as banks will be reviewing their rates. Make sure you keep an eye on which banks are offering the best interest rates as not all of their products will increase by the BoE’s 25 basis points.

On the other hand, borrowers and homeowners with a mortgage are likely to face extra costs. For example, those paying off the UK’s average mortgage debt with a variable rate mortgage face paying an extra £17-£18 per month, which adds up to an extra £200 per year or more than £6,000 over the life of a 30-year loan term.

Angus Dent, CEO, ArchOver:

While banks are likely to pass the rate rise straight onto borrowers, they will be less keen to pass it on immediately to savers. Aspirational borrowing such as mortgages and bank loans will get more expensive – so the man in the street needs to counter that with strong returns on savings. Only 50% of savings account rates changed after last year’s rise, so there’s good reason to be underwhelmed.

But this is certainly a step in the right direction for the cautious Bank of England. While such an incremental rise won’t shake the earth, and probably means business as usual, it nevertheless spells good news for the UK.

The country is still hungry for a stronger economy, ten years after the financial crash. Both savers and investors are now aware that to chase higher returns, they need to open the door to alternative opportunities. Alternative finance options that offer higher yields – without sacrificing security – offer savers a path to higher returns in a still-struggling economy.

Savings accounts still aren’t the safety net they once were. Despite this rate rise, savers still need to cast the net wide in the hunt for higher returns.

Markus Kuger, Senior Economist, Dun & Bradstreet:

This rate hike had been anticipated by the markets, despite inflation having fallen in recent months, as UK growth seems to have recovered from the poor performance in Q1. The effects of the rate rise will be minimal, given the Bank’s forward guidance over the past months. The progress in Brexit talks will remain the most important factor for companies and households in the near to medium term. Dun & Bradstreet maintains its current real GDP and inflation forecasts for 2018-19 and we continue to forecast a modest recovery in 2019, assuming the successful completion of the talks with the EU.

Max Lehrain, Chief Operating Officer, Relendex:

The increase in interest rates is a significant moment as it is the first time the Bank of England has raised interest rates above 0.5 in nearly a decade. However, for savers, this change should act as a wakeup call as it is not likely to have a material impact on their investment meaning that those stuck in standard savings accounts are still missing out.

This is in large part down to the rate of inflation far outstripping interest rates, even with today's increase. In simple terms this means that if your savings earn 0.75% interest they are being eaten into by the effects of inflation.

With traditional lenders offering low returns on their savings accounts and cash ISA products, savers who are looking to achieve higher rates of returns should still consider alternative options. Peer-to-Peer (P2P) lending for example, can offer substantially higher returns, giving a good income boost when interest rates are still relatively low.

Innovative savers will identity these options to take this interest rate rise out of the equation. In real terms, over a three year period investing £5,000 in a cash ISA is likely to render a return ranging from £15 to £113, whereas P2P providers offer prospective returns far exceeding that. For example, investing £5,000 in a provider that offers 8%, would see returns of approximately £1,300 over a three year period.

Nigel Green, CEO, deVere Group:

Hiking interest rates now – for only the second time since the financial crash – is, to my mind, premature.

At just above the Bank’s target of 2%, inflation is not currently a key issue. In addition, major uncertainty surrounding Brexit, the looming threat of international trade wars, and absolutely average economic growth, business and consumer confidence are on the slide.

As such, there seems little real justification to increase interest rates now.

Against this back drop, why is the Bank of England raising rates today?

Has the decision been motivated in order to protect reputations and credibility after the Bank’s Governor and some of the committee had effectively already said the rise would happen?

Whilst today’s decision to hike rates is unnecessary, I think that the Bank is likely to refrain from any more increases until after Brexit.

Paul Mumford, Cavendish Asset Management:

The decision on balance might be the wrong one. While all agree that rates need to return to normality eventually, panicking and doing it for the sake of it - or just because other countries are doing it - will only make things worse.

The idea, as in these other regions, is to start incrementally escalating rates in a managed way as growth and inflation tick up. But the UK is in quite a distinct situation. To borrow some terminology from the Tories, the economy is stable, but far from strong - and certainly not booming. Higher interest rates could have very disruptive effects on sectors such as housing, where it could trigger a rush to buy at fixed rates, and motors and retail, which are performing OK but contain a lot of highly geared companies. This does not look like the sort of economy you want - or can afford - to remove demand from. Meanwhile the pound is holding firm at its lower base, so there is no immediate impetus to shore up the currency.

And of course looming behind all this is Brexit. Interest rates may be needed as a weapon to combat sudden inflation from tariffs should the worst happen and we crash out of Europe without a deal. It would make more sense to save the powder until there is more clarity on this front, and we now what sort of economic environment we're all heading into. The last thing we want is to be in a situation where we are stuck with higher and higher rates to combat inflation, while growth remains anaemic or stagnant.

These things are all swings and roundabouts, of course - one big plus from rate rises is that they will ease our mounting problem with big pension fund deficits. Whether this will make it worth the risk remains to be seen.

Stuart Law, CEO, Assetz Capital:

It looks like savers will be disappointed once again. Although the rate has risen slightly, this is unlikely to be passed on to savers, with many banks having form for just applying increases to borrowers.

What’s more, the Bank of England's statement that future increases will be at a 'gradual pace' implies that savers won't see returns that outstrip inflation for months - and potentially even years.

Rob Douglas, VP of UKI and Nordics, Adaptive Insights:

Ultimately, it is the companies that do not currently have sound financial planning processes in place that are likely to be impacted when changes like this occur, as it can upend budgeting and forecasting, making it difficult for finance and management teams to develop accurate financial plans and make business-critical decisions.

The 0.25% extra interest rate is being announced at an already uncertain time, when many fear the long-term effects of a possible no-deal Brexit or a potential trade war with the US on their business, organisations across the country will need to once again adjust their financial plans accordingly. To do this, companies must plan in real-time, with current data from across the organisation, so that they can mitigate potentially damaging consequences, such as a negative impact on profit margins.

The interest rate hike, while expected, is a reminder why businesses need to be able to continuously update their financial forecasts in real-time. Manual spreadsheets and processes simply don’t cut it anymore and finance teams need to be able to respond to economic changes such as this efficiently and effectively. With a modern, active approach to planning and forecasting, businesses will have the foresight and visibility to make better decisions faster, minimising the impact of unexpected government, regulatory or economic changes.

Paddy Osborn, Academic Dean, London Academy of Trading (LAT):

As widely expected, the Bank of England’s Monetary Policy Committee (MPC) raised the UK base rate by 0.25% today, stating that the low GDP data in Q1 2018 was just a blip, the UK labour market has tightened further and wage growth is increasing. This is the highest level of interest rates in the UK in more than nine years, and the MPC’s vote to raise rates was actually 9-0, against expectations of 8-1 or even 7-2.

There was also an unanimous vote to keep the level of government bond purchases at £435 billion, although the MPC remains cautious about the potential reactions of households, businesses and financial markets to future Brexit developments.

Assuming the economy develops in line with current projections, they stated that any future increases in the Bank rate (to return inflation to the 2% target) are likely to be “at a gradual pace and to a limited extent”.

In currency markets, GBP/USD spiked 50 pips higher from 1.3070 within 10 minutes of the announcement, but has since collapsed back below 1.3100. The longer term view for GBP/USD remains bearish, although there are a number of political and fundamental factors which may affect Cable in the coming weeks, namely Brexit developments, the developing trade war, and US interest rates.

The stock market, having fallen over 200 points since yesterday morning, failed to find any solace in the MPC comments and is currently trading at its 1-month lows around 7550. Higher interest rates mean higher cost of debt for companies, and this will often encourage investors to take some money out of their (more risky) stock market investments.

Feel free to offer Your Thoughts in the comment box below and tell us what you think.

Analysts currently expect the Bank of England to hike interest rates in May, but some are opposed, claiming the market is misjudging the BoE’s plans. Bond market guru Mohamed El-Erian says the potential rate hike is "far from a done deal."

Last week the BoE left interest rates on hold, adding to suspicious they may raise them in May. After all, the BoE has been hinting at increased rates since last November’s hike.

This week Finance Monthly asked experts: What are the indications? What's the BoE's plan? What are your thoughts on future implications?

John Goldie, FX Dealer & Analyst, Argentex:

Carney and Co. were not expected to spring any surprises last week, opting to keep interest rates on hold again, much as the consensus had suggested. While the vote to retain the current status of the asset purchase facility was unanimous, there were dissenting votes from serial hawks, McCafferty and Saunders, who saw that the time was right for the Bank to raise interest rates to 0.75%. Many of the major banks have brought forward their forecast for a hike to May, though Bloomberg's interest rate probability tool sets this likelihood still at only around 65%. Commentators are certainly warming to the idea, but most believe that it will be almost another year before a subsequent hike is carried out.

This may be underestimating the path of inflation, wage prices and - importantly – overstating Brexit concerns. Carney has repeatedly suggested that Brexit remains one of the greatest challenges to their forecast models, however, the price action in Sterling already belies a growing optimism, or acceptance, that the economic impact of the 2016 referendum is far less negative than suggested by the major players prior to the event. With a transition agreement in place, a move into the critical trade negotiations is a huge step forward even if it brings us to a position with the greatest potential for deadlock.

With headline inflation remaining high and now wage prices heading in the same direction, the UK's second hike in just over a decade will indeed come next time around. Furthermore, with a May hike enacted, the door will then open for a second hike of the year in Q4, an eventuality that the market is yet to price in. With Brexit concerns reducing on the growing optimism that a transition agreement will provide the time and space for a trade arrangement to be thrashed out, the prospect remains for Sterling to trend higher in the weeks and months to come.

We have been bullish on GBPUSD for more than a year now and even with such a consistent trend higher in the last 12 months, the pound remains historical cheap by nearly any measure. There will be times when negotiations with the EU falter, and with it Sterling will stutter, but with a focus on the policy outlook from the central banks and a long-term chart to hand, the medium-term future continues to look bright for the pound.

Samuel Leach, FX trader and Founder, Samuel & Co. Trading:

When the BoE begins to hike interest rates the main concern I see is the impact this will have on over indebted consumers. I have been paying close attention to UK unsecured consumer debt, which is currently at all-time highs of more than £200bn. Furthermore, the annual growth rate in UK consumer credit is 10% a year which is considerably higher than household income growth (2%), therefore a very concerning place to be. These are unsustainable levels now and an interest rate hike could tip these consumers over the edge. Particularly, those on interest rate tracker mortgages. This will then have a ripple effect on businesses as consumers rein in spending to pay off their debts.

For entrepreneurs it is damaging because funding is an issue as it is, let alone with higher interest rates as it will put off potential investors. The first thing businesses cut back on is risky investments and purchases, so entrepreneurs and small businesses will see the biggest brunt of it in my opinion. For the financial markets we should see strength come into GBP. That, combined with the soft Brexit announcement we had earlier last week could push GBP back towards 1.5 – 1.6 against the USD.

Markus Kuger, Senior Economist, Dun & Bradstreet:

The Bank of England vote to hold interest rates is not surprising, as recent figures indicate a moderation in inflationary pressures. However, with wage growth finally picking up, our analysis suggests that interest rates are likely to increase later in 2018, despite the tepid real GDP growth figures.

Based on our current data and analysis, we are maintaining a ‘deteriorating’ risk outlook for the UK but this could change to ‘stable’ depending on the outcomes of the EU summit this week. If the 28 EU leaders agree on the much-needed transition period until December 2020, the risk of a hard Brexit in March 2019 will drop significantly. That said, implementation risks remain high and the long-term future of EU-UK trade relations are still unclear. Against this backdrop, a careful and measured approach to managing relationships with suppliers, customers, prospects and partners is key to navigating through these uncertain times.

Jonathan Watson, Market Analyst, Foreign Currency Direct:

The Pound spiked up following the latest UK interest rate decision which saw GBPEUR and GBPUSD touch fresh levels as the recent improved expectations were realised. Whilst Inflation had fallen slightly lower than expected it remains above target and rising wage growth too has given the Bank of England a freer hand in raising interest rates.

Rising growth forecasts for the UK also add to the increasingly rosy picture for the UK, progress on Brexit with the agreement of the transitional phase has also added to the buoyant mood. Whilst the current stance of the Bank is for a rate hike in May any serious changes in economic data could derail that.

A rate hike in May is now very likely but with that looking so likely, the Pound may not move much higher. The next 6 weeks of economic data ahead of the decision on May 10th will now be pored over for any signs of either caution from, or indeed signs of further hikes down the line. It would seem likely that with the UK and global economy forecast to grow further in 2018 and 2019, the Bank of England will continue to need to manage rising Inflation as the economy grows.

In my role as a specialist foreign exchange dealer my clients have been quick to utilise the forward contract option to lock in on the spikes and moves higher for the Pound. Whilst the longer-term forecast has improved lately, the uncertainty over Brexit and the fact the UK remains behind other leading economies in the growth stakes, indicates a risk averse approach. Locking in the higher levels still remains the most sensible option to manage your currency exposure and volatility from the Bank of England and interest rate changes.

Robert Vaudry, Investments Managing Director, Wesleyan:

With two members of the Bank of England’s monetary policy committee voting to raise interest rates it is becoming more likely that at least one increase will take place this year, probably as early as May.

Whether the era of ‘cheap money’ has finally come to an end remains to be seen. Any rise will be welcomed by savers who will potentially see an increase in rates on saving accounts, but the cost of borrowing will increase too. Those on variable mortgages could experience higher interest rates for the first time and need to understand the financial implications this could have. However, it is important to remember that even with the interest rate rises expected, interest rates remain low by historical measures and below the rate of inflation.

It’s also important to not become complacent and we’d advise everyone to remain mindful that there may be uncertainty in the months ahead, especially as stock markets remain volatile.

If you have thoughts on this, please feel free to comment below and let us know Your Thoughts.

With the recent interest rate rise, from mortgages to savings, the public is still awaiting movement in the financial sphere. Below Paul Richards, Chairman of Insignis Cash Solutions, explains to Finance Monthly what 2018 holds for savers.

The Bank of England November rate rise has triggered a waiting game among banks. The government’s move to extend the rise to NS&I savers puts more pressure on competitors to do the same, but savers have still only seen the full benefit with a handful of banks. Most banks are still waiting to see what competitors do, or passing on only a fraction of the rise.

Some economic commentators point to two further interest rate rises in 2018, but protracted Brexit negotiations could delay this. If the Bank of England hikes rates again, it will once more be the government’s decision on NS&I rates that influences whether other banks will follow.

No savings provider wants to pay more interest than they need to, as it has a direct impact on their profitability. Margins have been compressed heavily since the global finance crisis and banks don’t want to see them fall further. Challengers are more hungry to grow their balance sheets via retail deposits, so we’ll likely continue to see better rates from these players than the traditional larger banks.

February 2018 will see the end of the £100 billion term funding scheme, a source of cheap borrowing for banks. Once this scheme is closed, appetite for retail deposits will increase, prompting more competitive rates in the market. Longer term the impact will be even more significant, banks have four years to repay money to the scheme, and will need to rely on retail deposits for some of these funds.

For several years a large amount of banks’ budgets and human resources have been dedicated to managing regulatory change. This drain has likely prompted unintended consequences for consumers; if banks hadn’t had to spend so much money on implementing new regulation, would we have seen the same level of branch closures?

But there are huge benefits from regulation, driving increased consumer protection and access to better deals. Open Banking and PSD2 are the most interesting areas to watch - both open up, with consumer consent, bank transaction data to power new financial tools. These will help people better manage their money and access the right deals for them. A wide range of fintechs across the UK, including Insignis, are working hard to develop new solutions and over time consumers will feel a real benefit to their day-to-day lives.

Some banks are further advanced with their Open Banking plans than others, and there are challenges to grapple in terms of data management and security; however, there’s no question that 2018 will be a year of huge advances that give consumers more control over how they manage their money.

The US economy’s growth rate last quarter was recently revised on the basis of stronger investment from businesses and government bodies than previously assessed. GDP in Q3 was revised up to 3.3% annual growth rate compared to the previous quarter. This was according to the US Department of Commerce in a press release on the 29th November 2017.

This week Finance Monthly reached out to sources across the globe to hear their take on the current situation in the US, what has impacted growth across several industries, and what the forecast for 2018 looks like.

Josh Seager, Investment Analyst, EQ Investors:

US growth was revised to 3.3% annualised on Wednesday, up from an initial reading of 2%. This was the fastest growth rate in 12 quarters but there is likely to be some hurricane distortions, so we must interpret the data with caution, we don’t expect it to continue at this level.

Looking into the numbers and things look broadly positive. Consumer spending, which accounts for around 70% of the US economy, remained strong, growing 2.3%. This wasn’t quite as strong as last quarter but is a good level nonetheless and shows that the US consumer is relatively healthy. For the consumer to continue to spend, we really need wage growth. So far, this has been pretty anaemic in spite of very low unemployment. We believe this could be about to change. NFIB Small Business Surveys show that 35% of small business are now finding it hard to fill jobs and 21% are planning to raise compensations as a result. This data points are at cycle highs and this is highly likely to feed into US wage growth at some point.

Business investment picked up, contributing 1.2% to growth, up from 1% the quarter before. This is a pleasing sign as it suggests that corporates are gaining confidence in the economy and are willing to make the investment necessary to capitalise on this. Corporate profits were also up last quarter which should give corporates the financial freedom to continue to develop and (hopefully) growth wages.

Dan North, Chief Economist, Euler Hermes North America:

Consumer

• Despite tepid income growth and only modest spending growth, consumers are exuberant.
• Consumer confidence rose 3.3 points in November to 129.5, the highest in 17 years.
• The present situation component rose 1.9 to the highest level in almost 17 years, while the future expectations component gained 4.3, also a 17-year record.

Home Sales

• The actual level of annualized sales can be more revealing, and at 685,000 units it is the highest in ten years, which is undoubtedly good news. But it also illustrates the damage a burst asset bubble can cause.
• Despite having grown annually at 15% since the bottom, the current level of sales is still only half of what it was at the peak of the housing bubble, and it has only rebounded from the collapse to levels seen 20 years ago.
• But to repeat, the recent news is strong.

Holiday Shopping

• According to Adobe Insights, on-line sales rose 16.8% on Cyber Monday and 17% on Black Friday, extraordinary growth rates.
• But online sales are still only about 10% of total sales so these growth rates are not unexpected.
• The National Retail Federation (NRF) had predicted 164 million people would shop over the holiday weekend, but the actual results were 174 million.
• But then despite seeing more shoppers than expected, the NRF did not increase its previous forecast of 4% sales growth.
• The reports are mixed, but in the end we expect to see very modest growth in brick and mortar sales and very strong growth in on-line sales.

Tim Sambrook, Professor of Finance, Audencia Business School:

The upward revision, from previously 3.0%, was mainly due to a higher than expected increase in public and private spending.

The increase compares favourably with the second quarter of 2017 of 3.1%, and the third quarter of 2016 of 2.8%. It is the fastest rate since Q3 2014.

If the current estimate of growth in the Q4 GDP is realized, then this would represent the first time since 2004 that the US economy has posted three consecutive quarters of over 3%.

The growth rate is in line with the government’s target. They are engaging a tax cut plan to lift GDP to 3% annually. However, economists see such a pace as unsustainable and expect growth to slow sometime in 2018.

If you were to look for some bad news in the revision, then you could point to the fact that the revision comes from public and private spending and not consumer spending, which makes up 70% of the US economy. In addition, inventory build-up was significant and could prove to be a drag on growth in the future. However, this upward revision comes with a backdrop of severe hurricanes and low wage growth, which should have been quite negative for consumer growth.

This positive news will strengthen the case for the Fed to raise rates next month, although the announcement had little effect on the dollar or the markets.

Duncan Donald, CEO, The London Academy of Trading:

The highlight of last week’s US data card was the release of the GDP numbers for the third quarter of 2017. The number brought US GDP from 3% to 3.3%.

This is slightly above the median expectation of 3.2%, and shows the US economy continues to expand progressively with the GDP reading being the most aggressive since late 2014.

But in context, what does this mean for the US rate path, as the December rate decision from the Federal Reserve rate setting committee comes next week? From freshly inaugurated Federal Chair Jerome Powell’s perspective, the data is on course for a hike. Even the departing Janet Yellen appeared to shift her dovish tone, referencing data with the possibility of a hike in December.

We need to look no further than the recent performance of US stocks and the dollar for confirmation that the market believes in the upcoming rate hike. Despite the ongoing investigation into President Trump’s electoral campaign, which is an obvious anchor, there are no signs of a slowdown in the US positivity story. The one final hurdle for the market to overcome ahead of next week’s decision is the Non-Farm Payrolls on Friday. The data has been somewhat muddied over the last few months, as hurricanes have taken their toll. However, this month, we should expect to get a true reading on the strength of the US jobs market.

A strong Friday performance will push the market up the final few percent towards a December hike.

John Lorié, Chief Economist, Atradius:

Across the Atlantic, the US economic outlook is also robust, which is reflected in high business confidence. US GDP is expected to expand a solid 2.0% in 2017 and 2018. The positive outlook is supported by strong job growth, very low and still declining unemployment, and even firming wage pressure. In this environment, the number of bankruptcy filings is at historical lows. In Q3 of 2016, the number of bankruptcies in the US reached its lowest quarterly level since Q4 of 2006. We forecast a 4.0% decline in the overall number of insolvencies this year and a mild 2.0% decline in 2018. The US outlook is subject to risks, on the upside (tax reform) as well as downside (trade, NAFTA).

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Today reports indicate the FTSE closed on a record high yesterday, outperforming its already high record from Friday last week, following the Bank of England’s anticipated decision to raise interest rates from 0.25 to 0.5% last week.

The truth is, this changes a lot, from mortgages to bonds. Below Finance Monthly hears from many sources on Your Thoughts, how consumers should behave, how banking may evolve, how profits can change, what might happen to the pound in weeks to come and so forth.

Anthony Morrow, Co-Founder, evestor.co.uk:

In theory, the rise in the interest base rate should mean that consumers get higher interest rates on their savings. However, people shouldn’t get too excited about this. It often takes many months for the changes to be felt in savings accounts, and even then, the increases in savings rates can be marginal and may take years to build into noticeable rates of anything over 3%.

Consumers should also consider that the increase in base rate still means that their cash savings are playing catch-up. The past decade of interest-rate squeezes has meant that the value of cash savings have dropped instead of increasing in value.

The best course of action is for consumers to spread their savings and investments, and to look for alternatives to the traditional high street savings accounts and cash ISAs. It’s now easier than ever for consumers to invest money via the internet in stocks, shares and global investment funds that could generate average returns of between 5% - 7%. The key thing though is to ensure people get advice about what to do with their money before they part with their cash – this isn’t always readily available – and to check any charges that they’re likely to incur for making investments. In some cases, excessive fees can eat massively into the investment returns, sometimes by as much as half.

Gianluca Corradi, Head of Banking, Simon-Kucher:

Investors with shares in UK banks can cheer as the rate increase will boost the operating profits in the retail banking industry by £274 million over the next 12 months. This 3.1% increase in the operating profit of the banks will be positive news for the shareholders as the U.K. banks have had their profitability squeezed in a low rate environment despite numerous cost cuts and efficiency increase measures.

The gain for shareholders is expected to come as banks increase the lending rates immediately but deposit rates only gradually and by a lower amount. We can expect the banks to immediately increase the interest charged on new loans and those on variable rates by the full 25 basis points (bps), giving a boost of about £1.26 billion in their interest income for the coming year. Concurrently, the interest expense on deposits is likely to rise by just under £1 billion as the rates for savers rise over time.

Consumers can expect modest returns on their deposits as rates, though higher, will still be low in absolute terms. For instance, a saver who manages to get the entire 25bps increase on £10,000 of deposits, would stand to make an additional £25 over a year.

Paresh Raja, CEO, MFS:

In light of rising inflation and stagnating economic growth, the decision to increase interest rates for the first time in a decade comes as no surprise. Nevertheless, it is important to note that the rise in interest rates will place an added financial pressure on first-time buyers and buy-to-let investors needing to borrow money. While the impact on the UK property market may not be immediately obvious, there is no question that this month’s upcoming Autumn Budget now takes on greater significance as it must find ways of alleviating stress and providing support for property buyers. With the interest rate now sitting at 0.5%, this is a prime opportunity for the Government to address issues like real estate demand and Stamp Duty to ensure the market remains buoyant and readily accessible for homebuyers and investors alike.

Angus Dent, CEO, ArchOver:

This rate rise of 0.25% is largely symbolic. At the same time, it’s also a year too late. Dropping the interest rate below 0.5% was the wrong decision in the first place. The Bank should have pushed rates up to 0.75% as a show of strength that would have driven inflation down as the pound rose.

Although this rise is unlikely to have any major material effects, it is a return to the trajectory we should have been on for the past year, and a good sign for a bolder policy. For many, the move towards a higher interest rate will simply mean business as usual.

Following the financial crash, there is a hunger to make up for ten lost years and UK savers and investors are finally waking up to the realisation that they need to chase higher returns. With interest rates remaining below 1%, this means looking for opportunities to branch out beyond traditional vehicles and introduce greater diversity into portfolios to secure a higher yield.

Emmanuel Lumineau, CEO, BrickVest:

This announcement is momentous for the UK economy and should signal the start of a series of gradual increases. The Bank of England has decided that inflation is potentially getting out of control and the economy now requires higher borrowing costs. The decision also signals that the UK economy has not performed as weakly as the Bank predicted last year.

Increasing interest rates has a direct impact on real estate. Higher interest rates and rising inflation make borrowing and construction more expensive for owners, which can have a constraining effect on the market but can also lead to an increase in property prices. There has certainly been an abundance of international capital flowing into real estate, almost every major institutional investor globally has been increasing their portfolio allocation to real estate over the last five years mainly because of lack of alternatives.

We continue to see the highest level of volatility from the office sector as many international firms currently headquartered in the UK put decisions on hold over their long-term office space requirements. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market. Indeed our recent research showed that 34% of institutional investors believe the biggest real estate investment opportunities will be found in the office sector and the same number in the hotel & hospitality industry over the next 12 months.

Uma Rajah, CEO, CapitalRise:

The Bank of England’s decision to raise its base rate of interest from 0.25% to 0.5% might superficially look like good news for savers, who have had to live with near non-existent returns on their deposits for some time. But in reality it is highly unlikely that banks will actually pass on much — if any — of the rate rise to their customers. It’s more likely they will act to increase their margins, focusing on improving their own profitability rather than doing what’s best for customers. Savers should take note and look for alternative, more lucrative, ways to grow their pot with minimal additional risk. While the base rate will continue to rise over the next 12 to 18 months, it could be some time before banks pass on the benefits.

Meanwhile, the rate rise is bad news for property developers and borrowers that are using banks to finance their loans. Banks charge based on a margin to LIBOR, which will go up in line with the base rate rises. Combine this with other longstanding challenges in securing finance from banks for real estate projects in the current climate, and property borrowers will be much better off looking at more innovative sources that can deliver finance more quickly and offer better value — particularly if the rate continues to rise over the next 12 to 18 months.

James Bentley, Trader, Learn to Trade:

Following the Bank of England’s announcement that interest rates are rising by 0.25%, the British central bank will hike borrowing costs for the first time in more than 10 years due to the recent surge in inflation.

Many economists have warned that the time is not right for a hike as recent data has painted a subdued picture of the economy while uncertainty over how Britain's withdrawal from the European Union will play out remains. With Brexit negotiations still underway, British consumers should prepare themselves for further fluctuations to interest rates over the next year.

The pound has pushed higher against the dollar in early trade, while London's FTSE100 searched for direction ahead of the announcement. Although the announcement has created uncertainty, we expect inflation to drop to 2.2% by 2020 - where the rate will stagnate and hold for a period of time.

Paul Davies, Director, Menzies LLP:

Even though the rate rise was well signposted by Mark Carney, it will bring hardship for businesses that rely on consumer spending.

Consumers are always wary of a rise in interest rates and we may see the retail industry experiencing a bumpy ride as UK shoppers tighten their purse strings. Businesses can defend against the effects of turbulence by ensuring cash management is a top priority, managing creditor payments and adapting to changes across the supply chain.

Consumers and businesses will be hoping that after the announcement, any further interest rate rises will be staved off until well into the New Year.

Mihir Kapadia, CEO and Founder, Sun Global Investments:

The Bank of England has given in to the rising inflation, which has been above their 2% target and peaking at 3%, by raising interest rates for the first time in a decade. While the interest rate hike bodes well to support the pound, it also increases the borrowing costs for consumers and business. It will mean an increased squeeze on consumers with loans and mortgages, thus nipping their spending and in turn affect the economy. It may well turn out to be a vicious loop, especially as Brexit woes continue to weigh down on the UK’s economy.

The last the time the Bank of England had increased the interest rates was in July 2007, when it pushed the cost of borrowing to 5.75% months before cutting them during the onset of the financial crash of 2008. This increase comes at a time when the economic framework has stabilised and careful credit scrutiny is in place to prevent another crash. The interest rate hike may well deter consumers from accessing cheap credit, which will bode well for the financial watchdogs.

The next interest rate hike may well take a while, until further clarity emerges on Brexit’s impact on the UK economy. Until then 0.5% is the only sword to battle 3% inflation, and curtail it from strengthening any further.

Frazer Fearnhead, Founder and CEO, The House Crowd:

I sincerely hope all the banks will have given as much thought and effort to increasing interest rates for investors as they will have given to helping people maintain their mortgage repayments and loan agreements”. He added “For the past decade investors have been forgotten and suffered derisory levels of returns on their savings. So, it is crucial that banks, increase interest rates on savings just as quickly as they increase interest charges to borrowers.

Gregg Davies, Company Director, IMA Financial Solutions:

We all talk about the winners and losers when Bank of England interest rates are mentioned. Of course, if you have savings on deposit in variable rate accounts, or a variable rate mortgage you could be affected directly.

Many are asking, will the rate rise make my mortgage more expensive? Most mortgage lenders offer fixed or variable rate mortgages, and many have already adjusted their fixed rate deals ahead of the speculation over an interest rate rise. Variable rates are either based on a lender’s own set variable rate or linked directly to the Bank of England – called trackers.

We have now had nearly eight years of unprecedently low rates - for a generation of first time buyers, low interest rates are all they have known.

Mortgage holders have taken the low rates on board, and today it is estimated that over 70% of mortgages are fixed rate deals – compared with a low of under 40% in 2001. On a day to day basis this is reflected in my own clients’ decisions.

Rob Douglas, VP of United Kingdom and Ireland, Adaptive Insights:

For many businesses across the UK, the rise in interest rates and subsequent fall of the pound will require action. Companies are operating in the midst of a volatile market, where the sterling went from being at its strongest since the Brexit vote, to taking an immediate tumble after the rise in interest rates was announced. This market instability can upend budgeting and forecasting, making it difficult for finance and management teams to devise an accurate financial plan and make business-critical decisions.

Economic and market volatility require businesses to be as agile and adaptable as possible to ensure their financial planning models reflect changing assumptions and conditions. To do this, companies must plan in real-time, with current data from across the organisation, so that they can mitigate potentially damaging consequences, such as a negative impact on profit margins. What’s more, businesses should prepare to be more responsive by running ‘what if’ scenarios in advance that will, for example, reveal the impact the rise in interest rates could have on their business, allowing them to make better, faster decisions.

Ultimately, it is the companies with sound financial planning processes in place that will have a better chance at success when volatility strikes.

Johan Rewilak, Economics Expert, Aston Business School:

Since the crisis of 2007, interest rates have been at record lows, and whilst this hike has only moved them back to pre-Brexit levels, the larger worry is about any future potential rises.

Since the decision has been made, Mark Carney and the MPC have already faced lengthy criticism about how the rate hike will impact the economy. There are those who believe recession is around the corner and that there was a desperate need to maintain interest rates at the 0.25% level to prevent this.

Those advocating the rise have done so by optimistically looking at data that shows unemployment has fallen to levels unseen since the 1970s and that the rate of underemployment (those working part-time who wish to work longer hours) has dropped. Nevertheless, wage growth (a metric of longer term inflation) has remained subdued.

My concern is and will be surrounding financial stability. Household indebtedness and mortgage to income ratios are at troublesome levels and any hikes in interest rates mean higher repayments. If the interest rate hikes lead to recession, this will only magnify these issues and have cataclysmic effects on the financial system as it did in 2007. Whilst, higher rates may put people off from future borrowing, there is a tricky trade-off surrounding those already highly indebted.

The upshot of this rate rise is that at least Mark Carney has two rolls of the dice if Brexit negotiations or the economy starts to sour before negative interest rates become a possibility. That being said, why would anyone raise interest rates that may create a recession just so they have the ability to lower interest rates and to try cure the problem

John William Gunn, Executive Chairman, SynerGIS Capital PLC:

This was widely anticipated by the wholesale markets following the language of the MPC’s September statement. The main question mark was over any Brexit-related outlook uncertainty. As the market had been positioned for this rise a failure to follow through could have caused the MPC credibility issues and sparked yet more speculation around Brexit headwinds to the economy.

For the general public, the good news is that more people are on fixed rate mortgages than ever so the effects for homeowners should be subdued. More people are renting and many households are lucky enough to be mortgage-free. As mentioned in the MPC statement, debt servicing costs paid by British households would remain "historically very low" despite this hike.

It’s not so great for first time homebuyers (many mortgage deals were withdrawn in anticipation of the BoE’s move) but attention now turns to whether the Chancellor can offer any stamp-duty concessions in the Budget on 22^nd November.

It's good news for neglected savers and the retired. While still low, retirees shopping around for annuities should already be seeing improved rates. Not all high street banks will be passing this rate rise onto their savers. Some committed ahead of the decision but they were in the minority.

As with the FOMC (the Federal Open Market Committee = equivalent of the MPC) in the US, the first interest rise is psychologically important, as it reminds borrowers that base rates for the last 10 years are not at “normal” levels. It should not be forgotten that for the U.K this is just a reversal of the post-Brexit-result emergency cut in Aug 2016. Any pre-Christmas consumer sentiment change may affect spending at high street retailers who have had mixed trading results recently. As with the U.S central bank guidance, we expect any rate rises over the coming years to be on a slow and gradual basis.

Given the modest growth forecasts issued by the MPC and their expectation that inflation with peak at 3.2% in the October CPI release, we do not anticipate any further tightening from the MPC until Q3 2018. The Brexit influence is unlikely to go away soon, as noted by the MPC in their statement.

Duncan Donald, CEO and Head of Trading, London Academy of Trading:

Last week we saw the UK MPC and Mark Carney deliver a rate hike in the UK to 0.5%, the first hike since the financial crisis in 2007.

It came as little surprise, with the market pricing in a 90% probability of this action prior to the announcement on “Super Thursday”. The act of hiking rates is perceived as ‘Hawkish’ and would typically drive the currency higher, but the price action reflected this was all but priced in.

The other positive element of the meeting, was the split of the voting members of the committee. The result was 7-2, showing that 7 members of the committee were in favour of the hike, with just 2 members dissenting. Forecasters had thought the split may be tighter, with a 6-3 or 5-4 majority to hike. These being the first two factors announced to the market, saw the pound appreciate half a cent against the dollar from 1.3220 to 1.3270. This move was sharply unwound as the market plunged over 2 cents to 1.3040.

The driver was the announcement that Mark Carney and his committee anticipates just two subsequent hikes, and not in the next year but over the next 3 years. This signified that in the short term we are very much looking at the ‘one and done’ scenario. The fears of Brexit and the unknown have perhaps rightly got the committee apprehensive of doing too much too soon. This was further underlined at the weekend, with comments from Mark Carney regarding fears of inflationary pressures that could be caused if we were to leave the EU without a deal.

Market traders and investors still question Carney’s ability to actually deliver what he says he will, in this case to raise interest rates. This was the market opinion in the UK and in his previous position in Canada. He delivered on the interest rate hike, but as the markets reflect, it was done in the most dovish of manners.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

In June the UK’s inflation rate dropped unexpectedly to 2.6%, down from 2.9% in May. This comes as a surprise given the socio-political situation globally and in the UK, giving spout to the alarming degree of uncertainty businesses and the public are facing.

According to the Office of National Statistics (ONS), this was the first fall in inflation since October 2016, and was mostly due to lower petrol and diesel prices. Economists are now reportedly saying that this could cause the Bank of England to raise interest rates.

Below Finance Monthly has sought out several experts who could give their thoughts on the inflation fall, and what’s to be in months to come.

Markus Kuger, Senior Economist, Dun & Bradstreet:

The unexpected fall in the UK’s inflation rate is another sign of the economic uncertainty the country faces in the current political climate. Our analysis shows that the level of risk is ‘deteriorating’, with Brexit negotiations creating considerable unpredictability for businesses operating in and with the UK. This has only been intensified by the results of the general election in June, as the government’s narrow parliamentary majority is further complicating the process of leaving the EU.

Alongside the backdrop of an already slowing economy (the UK posted the lowest real GDP growth of all 28 EU economies in Q1 2017), a poll of business leaders after the election indicated a notable drop in business confidence. The best advice for businesses is to closely monitor the economic climate and the progress of EU negotiations, and use the latest data and analytics to assess risk and identify potential opportunities. As Brexit negotiations progress organisations should get a clearer picture of the future, but until then careful management of relationships with suppliers, customers, prospects and partners will be key to navigating through these uncertain times.

Kate Smith, Head of Pensions, Aegon:

Rapidly rising prices are almost always bad news for consumers, particularly pensioners on a fixed income, who are clearly having to go through a bit of belt tightening at the moment. The problem is amplified by both low wages and low interest rates, which give people little opportunity to grow their savings to meet the growing cost burden. There are lots of options available for people that want to diversify their investments outside of rock bottom savings account, but it’s important to plan ahead, and if dealing with significant amounts, consider seeking the input from a financial adviser.

Many of the younger generation seem to be prioritising current lifestyle over long term savings ambitions, and there’s nothing wrong with that in principle, but as inflation begins to bite it’s important they don’t start to see saving as an unaffordable luxury, and even consider sacrificing their workplace pension. By far the most effective means of saving is to do so early, and often, and there’s a risk that reducing regular contributions becomes a habit that’s hard to reverse.

Ranko Berich, Head of Market Analysis, Monex Europe:

Real wages remain in contraction and inflation is above target, but not above the BoE’s expectations. June’s inflation slowdown significantly reduces the chances of a near term rate hike as it vindicates the BoE’s last Inflation Report, and provides further fodder for the intensifying debate in the MPC about “looking through” the current inflationary shock.

The BoE’s last Inflation Report forecast inflation to peak around 3%, and this view remains intact after June’s CPI figures, although a marginal overshoot this year remains plausible. Although fuel prices were the main contributor to the slowdown, as a whole the release does not look immediately attributable to the sort of “transient factors” apparent in US inflation data, as several major basket categories made substantial negative contributions. Inflation in the UK is above target, but there’s nothing in June’s data to suggest an inflationary spiral of the sort that would entail an immediate rethink of monetary policy.

Sterling was looking rather frothy before the release, particularly against the greenback, and has been knocked down a notch as a result, as today’s release does reduce the likelihood of a hike in the immediate future. Thursday’s Retail Sales release will be crucial, unless consumer spending begins to recover from the shock seen in May it’s difficult to see how any of the centrist MPC members will be able to agree that policy normalisation is appropriate at any stage soon.

Edward Smythe, Economist, Positive Money:

While inflation may have fallen slightly in June due to lower fuel prices, it is likely that it will tick up back to 3% over the coming quarters. What should concern policymakers and businesses is that inflation is continuing to rise much faster than wages, which have only slightly improved in the decade since the financial crisis, putting pressure on households and forcing many on low incomes to rely on borrowing for everyday expenditure.

The Central Bank is in an increasingly difficult position. It may feel compelled to take action to meet the 2% inflation target, but raising interest rates could be catastrophic for an economy only growing weakly, and so reliant on personal borrowing and rising asset prices. This predicament highlights the need for policymakers to think seriously about new approaches to monetary policy which, unlike the current diet of quantitative easing and low interest rates, can help boost wages and reduce private debt.

Richard Flax, Chief Investment Officer, Moneyfarm:

With inflation at its highest level in nearly four years, you might expect that to increase the potential of an interest rate rise in the UK. But with wage inflation already lagging behind the latest Consumer Price Index (CPI), this isn’t necessarily a move that a lot of Brits could stomach. It’s now looking extremely unlikely that the Bank of England will increase interest rates in August.

Even if interest rates did rise, there is no way this could reach the levels that British savers are so desperate for, meaning those with excess savings sat in cash accounts should really start thinking about investing now to protect the value of their money over time. This is especially true for those saving for long-term goals such as retirement or helping their children through higher education. Millions of British savers could be in for a nasty surprise later in life if they find they can’t buy as much as they thought with their savings.

David Morrison, Senior Market Strategist, Spread Co.:

Sterling sold off sharply last week following the latest update on UK inflation. The headline Consumer Price Index (CPI) for June rose 2.6% when compared to the same period last year, and this was down sharply from +2.9% in May. Most of the decline could be blamed on a fall in oil prices and the British pound. However, inflation measures which exclude energy were also weaker, suggesting other factors were at play as well.

UK inflation has soared since the end of 2015 when year-on-year CPI was actually negative. Yet despite the pull-back last month it is still well above the Bank of England’s 2% target. Nevertheless, the consensus opinion seems to be that the pressure is now off the Bank to raise rates at next month’s key meeting. This is when the Bank’s Monetary Policy Committee (MPC) delivers its quarterly inflation report and is therefore a perfect opportunity to announce a change in monetary policy.

Before last week’s drop in inflation, many analysts expected a rate rise next month. For a start, there were a number of commentators who considered last year’s rate cut in the aftermath of the Brexit vote particularly ill-advised. Reversing it twelve months later would seem a sensible route to take.

This opinion gained traction after the MPC vote unexpectedly shifted from 7-1 against a rate cut to 3-5 in favour at their last meeting back in June. However, Governor Mark Carney is notoriously dovish, so he now has additional ammunition to urge caution from his colleagues next month. But the worry for Mr Carney and his dovish colleagues is that it’s dangerous to look at a single data point and extrapolate from it a change in trend.

If last weeks’ fall in inflation turns out to be a blip rather than the start of a steady decline, then it won’t take long for the Bank’s critics to accuse it of taking its eye off the ball.

Kerim Derhalli, CEO of invstr:

The UK has recently experienced a surge in inflationary pressure with, unsurprisingly, Brexit as the main culprit. As a nation, we love to consume foreign goods and the devaluation of the pound following last year’s referendum result made all of our imports more expensive. It also caused mayhem for economists and legislators looking to predict what is to come.

However, as the impact of this one-off devaluation event recedes, the inflation rate has started to level out and come down.

There are other economic factors too that are likely to put downward pressure on inflation. Wage growth has been lower than the overall level of inflation which has squeezed living standards forcing people to borrow more or spend less. Already low savings levels and high consumer debt suggest little capacity among Joe Public for higher prices. The uncertainty around the investment climate caused by Brexit has also impacted the housing market keeping both home prices and rents subdued. Outside of the UK, international energy prices continue to remain relatively low too helping to keep inflation in check.

What could change? One factor to consider is the current domestic political debate about higher domestic wage settlements in the public sector, which could help to drive up prices. Plus, as we learn more about the UK’s international standing in the world going forward, there are sure to be factors that economists haven’t even begun to consider that will throw their prediction models into disarray. Forecasting either growth or inflation rates is unlikely to get any easier anytime soon.

Jamie Smith-Thompson, Managing Director, Portafina:

Inflation is especially going to hit those pensioners with an annuity. Although there is an option to inflation proof an annuity when it is first taken out, most people decide not to factor it in because the benefit leads to such a reduction in income in initial retirement. Consequently, the majority of pensioners with an annuity will be on a a fixed income. The knock-on effect is as inflation increases, their purchasing power reduces. The longer you are in retirement the less money you will tend to have in real terms and sadly it is in later retirement when that money is needed for care and support. This is all a powerful reason why it is important that the triple lock remains on the state pension to provide some degree of protection.

One of the key questions people ask themselves as they consider their retirement is “How am I going to take the income?” and inflation and death benefits should be a primary factor to bear in mind when looking at what’s out there. The two primary options are drawdown or annuitys. If you want to factor in inflation-proofing into your annuity you could reduce your initial pension income by around 30%. Apart from the huge reduction itself, it is an unattractive proposition because most people are more likely to need greater income in the initial part of retirement, as this is when they are more active. For this reason, annuities are not as popular as they once were. Drawdown on the other hand takes inflation into account by default. Drawdown remains invested so if inflation goes up, the markets usually go up as well. It is far more flexible and it allows the owner much more control in terms of the state of the economy.

Adrian Slack, Senior Trader, Learn to Trade:

Since the UK's vote to leave the EU last year, the value of the pound has continued to depreciate. This stimulated an increase in the cost of imported goods and raw materials prompting an increase in inflation.

As the value of sterling continues to fall, households should expect to feel the pinch of higher costs on everyday imported goods in their baskets and on European holidays. Businesses should also expect to incur higher costs for doing business in Europe – they need to plan carefully when buying goods from overseas to lessen the blow on a potential fall in business profits. Exporters will continue to benefit as sterling’s fall makes UK goods more competitive overseas.

Moving forward, we expect inflation rates to creep back up steadily due to sterling’s continued weakness due to political risks resulting in higher import costs and fundamentally increases in prices to purchase. Whether this leads to a rise in interest rates is still to be confirmed. There’s an entire generation on low mortgage rates and so any increase in interest rates will have a negative effect on the housing market. We are in a bit of a catch 22 at the moment. With Brexit negotiations underway, it’s difficult to say how high inflation rates are likely to go.

Ana Boata, Economist for Europe, Euler Hermes:

June’s lower-than-expected inflation rate is mainly due to base effects linked to the summer discounting of some goods’ prices and the appreciation of the Sterling in April and May. These effects should already fade away in July and we expect the inflation rate to approach but remain below 3.0% year-on-year this autumn.

Looking towards 2018, the growing economic uncertainty surrounding Brexit will continue to hamper sterling. Increasing import costs will continue to put upward pressure on inflation, which will hit 2.7% on average in 2017 and 2.6% in 2018. This will act as a drag on consumer confidence and trigger a significant slowdown in consumer spending growth to 1.9% (from 2.8% in 2016) and 1.2% respectively.

GDP growth is expected to slow down to 1.4% in 2017 and 1.0% in 2018 which, coupled with the weakness of Sterling and the rise in inflation, would argue for a smooth rate hike in H2. This should support households’ real purchasing power and help avoid a sharp adjustment of the residential housing market.

From 2019, the level of inflation will be heavily influenced by the UK’s trading relationship with Europe. We forecast that a transition deal – where the Single Market conditions would still be kept for defined period of time – is the most likely outcome. This should be seen as a good news and help Sterling stabilise somewhat. Inflation should moderate slightly to 2.4% in 2019 and 2.3% in 2020. Without a transition deal, inflation would likely reach a high level of 3.5% in both of those years.

High levels of competition, increasing discounter market share and an online shopping frequency more than twice the European average have already made the UK retail sector of the most challenging in the world. In addition, growing financial stress, highlighted by a 10pp increase in net gearing ratios last year with average profits (EBIT) slipping by 1.4pp to 5.6%, is expected to place greater pressure on cash flow and payment terms throughout the retail supply chain.

Salvador Amico, Partner and head of the Brexit team, Menzies LLP:

The fall in the rate of inflation has come as a surprise but businesses, consumers and the Bank of England alike are unlikely to be celebrating too much at this stage.

Future economic and market-driven volatility is still expected. Inflation rates could creep back up and the pound will remain volatile, hindering long-term investment plans. To avoid losing out, businesses should take steps to minimise their exposure to such volatility by re-assessing their supply contracts, distribution networks and hedging against currency fluctuations.

To date, there has been a reluctance from businesses to pass on extra costs to the consumer in the form of price rises, but this could become harder to avoid in future. In the meantime, businesses will remain focused on removing cost where it is possible to do so by renegotiating contracts and relocating supply chains closer to home.

Inflation rate fluctuations are usually an indicator that change is on the horizon and speculation over whether the Bank of England is likely to raise interest rates in the coming months will also be causing concern. However, with consumers being squeezed on a number of levels and wage inflation continuing to lag, it would be surprising if interest rates rose before the end of the year. With the economy hugely dependent on consumer spending, taking disposable income out of their hands would be counterproductive.

One of the key challenges facing businesses at the moment is exchange rate volatility. By now, the impact of recent falls in the value of the pound have worked their way through the system and this could mean that the economy is starting to stabilise.

This has been a year of curveballs and, as we have seen, it can take just one shock change to unsettle the entire business community. For the time being, however, inflation rates appear to be moving in the right direction and we should be grateful for that, even if we know it is unlikely to last.”

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Growth expectations for 2017 remain subject to both upside and downside risks from potential policy changes as the Federal Reserve considers raising interest rates for the second time in three months, according to the Fannie Mae Economic & Strategic Research (ESR) Group's March 2017 Economic and Housing Outlook. Full-year economic growth is projected at 2.0 percent, unchanged from last month, while the forecast for current quarter growth is down slightly due to weaker-than-expected consumer spending data. Still, general business and economic sentiment remain strong despite policy uncertainty.

Thanks to rising household net worth and healthy jobs data, consumer spending should remain the primary driver of growth. A pickup in the Fed's favoured measure of inflation in January supported several Fed officials' hawkish speeches, which led the market to fully price in a rate hike at the conclusion of the Fed meeting later today. The ESR Group expects today's target rate increase to be followed by two additional hikes in the second half of the year. Home sales should continue to improve this year despite affordability challenges, including continued strong home price appreciation due to scarce inventory.

"Our economic forecast remains in a conservative holding pattern as we await word on the particulars of the new Administration's plans for fiscal stimulus," said Fannie Mae Chief Economist Doug Duncan. "In the meantime, economic sentiment from most industry stakeholders continues to reach new heights: consumers, as demonstrated by our National Housing Survey, are more positive than at any time since the survey's inception in 2010 about the direction of the economy, while homebuilders' optimism remains near an eleven-year high."

"Tight inventory remains a boon to home prices and Americans' net worth, but it also continues to price out many would-be first-time homebuyers. However, our research suggests that aging millennials, now boasting higher real wages, are beginning to narrow the homeownership attainment gap," said Duncan.

(Source: Fannie Mae)

Data through January 2017, released by S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, shows the composite rate up three basis points from the previous month at 0.92% in January. The bank card default rate recorded a 3.21% default rate, up 26 basis points from December. Auto loan defaults came in at 1.06%, up three basis points from the previous month. The first mortgage default rate was 0.72%, up one basis point from December.

All five major cities saw their default rates increase in the month of January. Miami had the largest increase, reporting 1.67%, up 14 basis points from December. Miami's composite default rate is at a 31-month high. Dallas and Los Angeles both reported eight basis point increases from the previous month at 0.75% and 0.80%, respectively, in January. Chicago saw its default rate increase five basis points to 1.03%. New York reported a default rate increase of one basis point from the last month at 0.88%.

When comparing the bank card default rates among the four census divisions, the default rate in the south is considerably higher than the other three census divisions.

"While consumer credit default rates on mortgages and auto loans remain low and stable, default rates on bank cards have popped up to the highest level seen since July 2013," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "Recent data point to consumer optimism: retail sales rose 5.5% in January 2017 compared to a year earlier, consumer sentiment measures rose over the last two years, and employment and labor market conditions are favorable. Federal Reserve data on consumer credit and mortgage debt outstanding reveal that consumers are borrowing money.

"Current default levels do not present any immediate concerns for the economy. During 2004-2006, a period of strong retail sales and consumer spending, bank card defaults were higher than today. Moreover, even if interest rates were to increase much faster than the Fed or most analysts currently expect, the cost of borrowing money is unlikely to create problems for consumers. The weak spot, if there is one, would come with a rise in unemployment and an economic downturn."

The table below summarizes the January 2017 results for the S&P/Experian Credit Default Indices. These data are not seasonally adjusted and are not subject to revision.

The table below provides the S&P/Experian Consumer Default Composite Indices for the five MSAs:

(Source: S&P/Experian Consumer Credit Default Indices)