Inflation pressure in western economies subsided during the third quarter with interest rates reaching multi-decade highs. Growth in the world’s major economies became increasingly divergent, with the US and Japan economies performing surprisingly well whilst China and Europe have begun losing momentum.
Investors have begun to delay their expectations for rate cuts as the US economy is proving to be far more resilient than anticipated thanks to its robust labor market. Market also rules out recession and interest rate cut possibilities during this year, but is aware of renewed inflation pressure driven by higher energy prices amid sticky core inflation.
At Jackson Hole, Chairman Powell reiterated the Federal Reserve’s (Fed) determination to bring inflation back to 2% and left the door open for further rate hikes if necessary. US Treasury spiked to year high levels and USD remained strong on the back a “higher for longer” narrative in US Treasury (UST) yields. Stock markets are expected to remain under pressure on interest rate volatility, albeit the disinflation progress in western economies is halfway done.
In China July Politburo meeting reiterated growth remained the top priority for the government. A series of easing measures had been rolled out with the objectives of boosting demand for the property sector and revitalizing investor confidence for the capital markets.
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