Inflation fears return to haunt FTSE 100 as City eyes Jackson Hole 

London markets today started the week in risk-off fashion as investors brace for the annual meeting of central bankers at Jackson Hole and fretted over high inflation.

The capital’s premier FTSE 100 index dropped 0.22 per cent to 7,533.79 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, plunged nearly two per cent to 19,499.34 points.

The global central banking elite will meet for the annual symposium of monetary policy in the US state of Wyoming this week, with the event kicking off on Thursday.

US Federal Reserve chief Jerome Powell’s remarks on Friday top the bill, with traders betting he will commit to more rate hikes despite the American economy showing signs of weakness.

It is the first Jackson Hole summit in decades in which inflation is running far above the Federal Reserve, European Central Bank and Bank of England’s two per cent targets.

Investment bank Citi today forecast inflation may rise to as high as 18.6 per cent in the UK, which would be the steepest level in nearly 50 years.

“The Jackson Hole summit of central bankers and finance ministers is widely expected to see US Federal Reserve chair Jerome Powell take to the floor and puncture optimism which has built up over hopes the Fed may be nearing the point at which it pivots away from rate hikes,” Russ Mould, investment director at AJ Bell, said.

The euro hit parity with the dollar again briefly during opening exchanges.

Airlines dragged the FTSE 250 lower, with easyJet, TUI and Wizz Air all falling more than four per cent.