Improved growth prospects for China and Europe and hopes of a sustained decline in inflation have supported the markets since the beginning of the year. However, sharp central bank rhetoric and weak growth indicators in the USA could prove to be spoilers.
More and more central banks are signalling a reduction in the pace at which they are raising key interest rates. However, as Chief Economist Gerhard Winzer explains, this does not necessarily mean that central banks are softening their focus on fighting inflation. Rather, a pause in the rate hike cycle would require a change in inflation dynamics.
The unexpectedly high inflation rates draw even wider circles. In view of the pessimistic mood, the question arises whether the negative environment is already being reflected by market prices.
The death of Queen Elizabeth II, her succession by Charles III and the appointment of the new prime minister, Liz Truss, mark a change of era in Great Britain. The government’s focus is on the fight against inflation and high energy prices.
Many economic indicators point to weakening economic momentum. Meanwhile, the US labor market continues to be very robust, which recently mitigated the immediate risks of recession in the United States.
Ahead of the upcoming interest rate decision by the Federal Reserve, a number of economic indicators point to increasing risks of growth or recession. There are also uncertainties regarding the further development of inflation and the effectiveness of monetary policy measures.
The “divorce agreement” of the British with the EU stands. At the highly anticipated EU Special Summit on Sunday, Britain and the EU agreed on their post-Brexit relations at the end of March 2019. Now only the vote in the British House of Commons is missing. It’s getting tight.
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