{"id":935,"date":"2022-11-01T15:53:32","date_gmt":"2022-11-01T15:53:32","guid":{"rendered":"http:\/\/kme.com.cy\/?p=935"},"modified":"2022-11-03T15:57:14","modified_gmt":"2022-11-03T15:57:14","slug":"end-of-the-beginning","status":"publish","type":"post","link":"https:\/\/kme.com.cy\/?p=935","title":{"rendered":"\u2018End of the Beginning\u2019"},"content":{"rendered":"

Hello. Today we look at the potential peak in global interest rates,\u00a0 lockdowns in China and how the US consumer may be in better shape than some fear.\u00a0<\/em><\/p>\n

The Peak Beckons<\/h2>\n

Wall Street is beginning to sense global interest rates may be about to peak.<\/p>\n

Economists at\u00a0JPMorgan\u00a0are declaring that assuming their forecasts for the Federal Reserve and other central banks prove correct\u00a0\u201cthe most synchronized and aggressive global hiking cycle in 40 years will end by early next year.\u201d<\/p>\n

Peers at Credit Suisse say central bank hawkishness may even have topped out\u00a0in August given an index which tracks surprise decisions at the 30 most recent policy\u00a0meetings.<\/p>\n

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  • Australia, Canada, Poland and Colombia have already dialed back the size of rate hikes or paused<\/li>\n
  • The European Central Bank has said it feels it is making progress in its inflation fight<\/li>\n
  • San Francisco Fed President Mary\u00a0Daly has said the US should start planning\u00a0to reduce the size of its rate increases<\/li>\n<\/ul>\n

    Much still will depend on what Fed\u00a0Chairman Jerome Powell says on Wednesday, when he and colleagues are\u00a0set to increase their\u00a0benchmark by 75 basis points for the fourth straight time to 3.75%-4.%<\/p>\n

    Anna Wong\u00a0of Bloomberg Economics reckons\u00a0Powell will \u201csignal\u00a0a downshift in the pace of rate hikes ahead\u201d by presenting a 50 basis-point increase as the base case for December.<\/p>\n

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    Of course, pivoting doesn\u2019t mean stopping, something markets should\u00a0bear in mind if they rally after the Fed acts.<\/p>\n

    Wong says she suspects Powell will suggest\u00a0a higher peak in rates than the Fed did in September, making the point that\u00a0\u201cthe hike pace is less important than the endpoint.\u201d<\/p>\n

    As far as the Fed is concerned, JPMorgan still reckons it will lift its key rate to 4.75% in the first quarter. Goldman Sachs sees an end at 5% in March<\/p>\n

    The ECB, Bank of Canada and Bank of England are all also expected to tighten more.<\/p>\n

    And if inflation proves stubborn yet again then the authorities will likely have to keep hiking.<\/p>\n

    Citigroup economists calculate\u00a0aggregate global inflation to now be\u00a0running at 9%.<\/p>\n

    Just yesterday, data showed\u00a0euro-area inflation\u00a0surging to a record 10.7% in October. ECB President Christine Lagarde said today that the\u00a0peak in rates\u00a0must ensure inflation returns to 2% over the medium term.<\/p>\n

    \u201cThe \u2018end of the beginning\u2019 of the ongoing monetary tightening will be reached when central banks intend to continue hiking but decide they can take the risk of doing it at a less brisk pace,\u201d said Gilles Moec of AXA Investment Managers. \u201cMarket optimism could however be curbed by the realization that a slower pace does not necessarily inform on the terminal rate. There will be more episodes of stress amid volatile dataflows.\u201d<\/p><\/blockquote>\n

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    • The Fed\u2019s cracking down on inflation may come at the cost of employment. Read a history of its dual-mandate\u00a0here\u00a0and a round-up of political criticism\u00a0here.<\/li>\n<\/ul>\n

      \u2014Simon Kennedy<\/em><\/span><\/p>\n

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      • Got tips or feedback? Email us at\u00a0ecodaily@bloomberg.net<\/em><\/li>\n<\/ul>\n

        The Economic Scene<\/h2>\n

        Anyone thinking that the end of China\u2019s Communist Party congress would usher a near-term relaxation of Covid-19 lockdown measures got a rude awakening to hear\u00a0the biggest factory in China supplying Apple\u00a0is now being\u00a0disrupted\u00a0by an outbreak of the pandemic.<\/p>\n

        While many economists anticipate a relaxation in the Covid-Zero approach at some point,\u00a0Victor\u00a0Shih, an associate professor of political science at the University of California, San Diego, says it may take as long as a year.<\/p>\n

        Over the weekend,\u00a0hundreds \u2014 if not thousands \u2014 of workers at Foxconn Technology Group\u2019s factory in Zhengzhou,\u00a0walked, hitched rides or dipped into their savings\u00a0to escape\u00a0the Covid flareup.<\/p>\n

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        Weakness All Around<\/h3>\n

        Activity slowed for manufacturing and services amid sluggish demand<\/p>\n