October 2, 2022

Has the inflation cooled down?

LQDFXperts Features | Has the inflation cooled down?

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The latest global PMI data showed companies’ input costs rising at the slowest rate for four months, signalling a cooling of global consumer price inflation.

The economy has cooled as the Federal Reserve moves closer to next week’s policy meeting. 

The market expects the central bank to culminate in the second straight 75 basis point interest rate hike. The Fed has said it is confident in achieving a soft landing by bringing down inflation without upsetting the economy. 

The global trend of aggressive monetary policy tightening meanwhile looks set to continue. The Bank of Canada is widely expected to deliver a 75 basis point rate hike following two consecutive 50 basis point rises.

June inflation data comes out this week, with most countries releasing data on Wednesday.

French, German, and Spanish CPIs are all expected to stay at or near record levels. U.S. producer price index readings may remain high at 10.7% year over year.

On the political forefront, Sri Lanka’s President was said to have stepped down in the wake of a protest crowd which ultimately stormed the presidential palace in Colombo.

Russia has continued to wage its war on Ukraine without signs of seeking compromise or negotiations. 

British Prime Minister Boris Johnson’s resignation opens the door to more uncertainty in the UK as the jockeying for his replacement begins.

Big bank earnings, CPI data expected later this week

Later in the week, a raft of economic data should provide a glimpse of the extent to which inflation has peaked before cooling down. 

Services PMI data for all major developed and emerging economies will build the economic picture for June.

Q2 earnings season also kicks off, with banks and a few key S&P 500 components leading the way.

The National Federation of Independent Business will release data from its monthly survey on Tuesday. Experts expect the survey’s index declined slightly in June, having fallen in May to its lowest point on record.

On Wednesday, the U.S. consumer-price index for June will offer a critical inflation reading. 

The UK will also issue Q2 GDP estimates on Wednesday, alongside services and industrial output data. Figures by the U.K.’s statistics agency may probably show that the economy contracted for a third straight month in May.

Also, the RBNZ is forecast to increase rates for a 6th consecutive occasion at its meeting. As a result, the central bank is likely to hike the Official Cash Rate by another 50bps to 2.50%.

On Friday, U.S. retail sales data may give investors a more hands-on take on how consumers respond to the current economic crosswinds. 

Experts will also assess whether surging fuel costs have added to price pressures and forced consumers to cut back on spending.

U.S. industrial production has probably grown more slowly in June than in May. 

China’s National Bureau of Statistics will release second-quarter gross domestic product data. Economists expect to see 0.9% growth from a year earlier.

Retail sales in China, a key gauge of consumption, have probably fallen 1% in June from a year earlier.

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