December 16, 2022
United States:
Fed’s High Inflation Forecast Baffles Wall Street After Soft CPI
The Federal Reserve’s updated economic projections this week appeared to incorporate an assumption that raised eyebrows: inflation would prove resurgent at the end of this year.
The quarterly projections showed Fed officials now expect so-called core inflation — which excludes food and energy — to end this year around 4.8%, up from the 4.5% figure they forecast in September. Yet that number looks much too high to Wall Street economists following a surprisingly-soft Labor Department release on consumer prices Tuesday, even though Chair Jerome Powell said it was reflected in the projections.
Europe:
ECB Is Doubling Down on Rate Hikes Just as a Recession Bites
The European Central Bank’s warning that aggressive interest-rate hikes are far from over is raising the stakes for the euro region, just as a recession takes hold.
Every increase in borrowing costs, including Thursday’s half-point move, advances the fight by Frankfurt officials against rampant inflation — but also risks a higher toll on the economy. The trade-off means the potential cost of an error is rising with each decision.
Asia:
Boost to China’s Economy from End of Covid Zero is Already Fading
A modest boost to China’s economy after Covid restrictions were rapidly dropped appears to have been short-lived as infections surge nationwide, according to high-frequency data compiled by Bloomberg.
After an initial pickup in early December when local governments began dismantling virus controls, several measures of economic activity — such as traffic congestion in major cities, travel between cities and consumer confidence — have dropped this week.
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