Summary
United States: Slowing Price Growth a Welcome Reprieve, FOMC Signals More Work Ahead
- Headline and core CPI surprised to the downside in November, rising 0.1% and 0.2%, respectively. The FOMC slowed its pace of monetary policy tightening, raising the fed funds rate 50 bps to a range of 4.25%-4.50%. Retail sales flopped and industrial production slipped. All signs point to a bumpy road ahead.
- Next week: Housing Starts, Existing & New Home Sales (Tue/Wed/Fri), Leading Economic Index (Wed), Personal Income & Spending (Fri)
International: Here a Hike, There a Hike, Everywhere a Rate Hike
- The European Central Bank (ECB) raised its policy rate 50 bps to 2.00% and announced plans to begin quantitative tightening in March. Its accompanying commentary was hawkish in tone, and we now expect the ECB to raise its policy rate to 3.25% through the first half of 2023. The Bank of England raised its policy rate 50 bps to 3.50% and struck a more balanced tone, while the Swiss National Bank hiked rates 50 bps and Norway’s central bank hiked rates 25 bps.
- Next week: Bank of Japan & Japan CPI (Tue/Thu), Canada GDP & CPI (Wed/Fri)
Interest Rate Watch: Markets Scoff at More Hawkish FOMC Rate Projections
- The FOMC may have slowed its pace of tightening, but the committee delivered a hawkish message about how high the fed funds rate may ultimately need to rise and how long it may need to stay elevated. However, markets appear skeptical that the FOMC will deliver, likely due to differing views on inflation.
Topic of the Week: The Trophy (and a GDP Boost) Are on the Line in the 2022 World Cup Final
- After 62 matches, the road ends here for the 2022 World Cup. Argentina and France will duel in Doha this Sunday in an enticing final matchup to decide which nation will be crowned world champions for the next four years. A World Cup win would be a welcome distraction, and potential economic benefit, to either country as both Argentina’s and France’s economies are looking far less golden than their football squads.
