The scenario for the US Central Bank’s move indicates that it raised it twice, in February and March, by 25 points
A report issued by the National Bank of Kuwait said that the World Bank warned of the risks of a global economic recession in 2023. After initial forecasts were issued in June 2022 indicating global economic growth in 2023 by 3%, the World Bank retracted and changed its forecasts, as it now expects GDP growth. The global gross domestic product increased by 1.7% in 2023, which is the slowest pace of growth since 1993, excluding the two recessions in 2009 and 2020.
The bank said that major slowdowns in advanced economies, including a sharp cut to 0.5% of its forecast for the United States and European economies, may be a harbinger of a new global recession, adding that the gloomy outlook will be more difficult for emerging markets and developing economies, as they face slowing investment activities. Business, weak currency and heavy debt burdens.
The NBK indicated that the markets eagerly awaited the release of consumer price data from the US economy, given its role in guiding the Federal Reserve’s policies with regard to raising interest rates. The data was released last Thursday, indicating a decline in the overall consumer price index in the United States from 7.1% to 6.5%. on an annual basis consistent with consensus.
As for core inflation, it fell from 6% to 5.7% in December. Details indicate that motor fuel decreased by 0.6% on a monthly basis, while food prices continued to rise for the twentieth consecutive month, by 0.3%.
Taking a closer look at the core inflation rate, we note a decline in the used cars and trucks price index by 2.4% on a monthly basis, as the index is one of the main drivers of the decline in core inflation data.
Fed officials have indicated the need to raise interest rates above 5% and keep them on hold for longer than markets expect. Mary Daly, the Fed’s official, expects interest rates to rise above 5%.
On the other hand, the official of the Federal Reserve, Rafael Bostick, affirmed the Federal Reserve’s commitment to curbing inflation, indicating his expectations for the interest rate to remain above the level of 5% “for a long time.”
Markets turned to Federal Reserve spokesmen Jerome Powell and Michael Bowman for guidance on the economy and interest rate paths.
While Powell offered little guidance on his view of monetary policy, he emphasized the importance of the Fed’s independence from politics and climate change, noting that tackling inflation may require unpopular measures in the short term.
US stocks rose after Powell’s remarks. On the other hand, Michelle Bowman, a member of the Federal Reserve Board of Governors, indicated that more rate hikes are expected in the coming period, and Bowman added: “Once we achieve a sufficiently restrictive rate of federal funds, we will need to stay at this level for some time.”
After the release of the CPI data, the markets priced in two rate hikes of 25 basis points each in February and March, which would push the Fed rate up to 5.00%. The markets also priced in their first interest rate cut of 0.25% as early as November 2023.
The next Federal Reserve meeting scheduled to take place in two weeks should shed more light on the path of interest rates from the central bank in light of recent inflation data and a tight labor market.
In terms of the economic situation in the United Kingdom, the GDP grew by 0.1% on a monthly basis in November, surprising economists who had expected a decline of 0.2%.
While the third quarter of 2022 witnessed a contraction of 0.3%, after the recorded growth of 0.5% of real GDP on a monthly basis in October and the surprising growth of 0.1% in November, the economy appears to have technically avoided recession (two consecutive quarters of negative growth). real time.
Despite the positive surprise, the Office for National Statistics noted that GDP contracted by 0.3% in the three months to the end of November, and economists said a recession may simply be postponed rather than avoided. The pound sterling continued to move within a limited range, and its trading ranged in the range of 1.20-1.2250 throughout the week.