Last week, global equities lost most of the previous week’s gains, falling 1.9% in local currency terms and 1.4% in sterling terms. The UK fared not too bad really considering the unexpected bad news on inflation and 0.5% hike in rates – falling by some 2.7%.

Despite Prigozhin’s abortive coup over the weekend, markets have not taken a dramatic turn, with equities down a little this morning, reflective of uncertainty over the wider and longer-term implications.

Business optimism numbers released on Friday showed confidence in the US, Eurozone and UK declining more than expected in June. In addition, all three regions will quite likely see a dip into mild recession at some point as monetary tightening starts to hit people’s pockets, posing some downside risk to equities. Mortgage rates will also have a serious role to play in this unfolding story, in the UK and elsewhere.

Inflation was yet again the source of serious disappointment in May. The headline rate was unchanged at 8.7% but the more important core rate picked up from 6.8% to a new high of 7.1%. This fuelled worries that inflationary pressures are becoming entrenched. The Bank left its forward guidance unchanged and kept its options open, sticking to the mantra that further tightening would be required if there were evidence of more persistent inflation pressures.

Almost certainly, the MPC will raise rates again in August. The only question is whether it is by 0.25% or 0.5% which will depend on the wage and inflation numbers released in the meantime. As to where rates peak, the market is now pricing in them reaching as high as 6%.