January 28, 2023

World Economic Forum at Davos: Inflation is here to stay

World Economic Forum at Davos: Inflation is here to stay

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Economists warn of global recession danger ahead of World Economic Forum at Davos. 

The World Economic Forum kicked off its first winter meeting in Davos on Monday. World leaders, central bank policymakers and top corporate leaders attend the first since before the pandemic meeting. 

While the Forum warns of an uncertain and turbulent decade ahead, they also identify a “polycrisis” of risks. Most of such risks relate to environmental and societal issues. 

According to a unanimous consensus of 22 senior economists surveyed by the World Economic Forum, inflation is here to stay in Europe and Latin America. 

Last week’s data showed that U.S. consumer prices fell in December for the first time in over two-and-a-half years. This added to hopes that inflation is on a sustained downward trend that could give the Fed room to ease back on rate hikes. Money market participants now see a 91.6% chance the Fed will hike rates by 25 basis points at its next policy meeting. 

Amid China’s rapid reopening, investors focus on prospects for recovery in the world’s second-largest economy. 

Shares slipped on Tuesday after China’s growth in 2022 slumped, halting their new year rally. The Chinese data showed that the world’s second-biggest economy grew 2.9% in the fourth quarter of last year. China’s growth for 2022 of 3% was far below the official target of about 5.5%.  

World Economic Forum at Davos – What else

U.S. earnings and retail sales numbers will be the main highlights in a holiday-shortened week. 

Investors are closely watching earnings results to see if U.S. companies can beat estimates amid concerns that higher costs are squeezing profit margins. Economists forecast a drop o 0.8% in figures due to be released on Wednesday, after a 0.6% decrease in November. 

The economic calendar also features data on producer price inflation, existing home sales and initial jobless claims, and regional reports on manufacturing output. 

The Bank of Japan’s latest meeting will be in focus after it wrong-footed markets with a policy tweak in December.

Therefore, investors will be keenly awaiting the conclusion of the BOJ’s two-day policy meeting on Wednesday

For more market events, watch our Economic Calendar

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