January 24, 2023
Debt-Limit Fight Risks Early End to Fed Quantitative Tightening
The Federal Reserve’s quantitative-tightening program risks being propelled toward an early end as US politicians bicker in Washington over raising the national debt limit, according to some economists and bond-market participants.
By shrinking its bond portfolio by up to $95 billion a month, the central bank is draining liquidity from the US financial system — complementing its interest-rate hikes in the battle to control inflation. An early end to QT could therefore provide the US economy with some relief.
Euro-Area Business Activity Shows Bloc May Dodge Recession
The private-sector economy in the euro area unexpectedly returned to growth at the start of 2023, offering further signs the region may avoid a recession and comforting the European Central Bank’s focus on underlying inflation risks.
S&P Global’s flash Purchasing Managers’ Index rose to 50.2 in January, better than the 49.8 reading predicted in a Bloomberg survey and the first time since June that the gauge was above the 50 threshold that separates expansion from contraction.
Japan Looks to Growth to Balance Budget Despite Defense Surge
Japan continues to predict it can balance its budget in the year starting April 2026 under a high-growth scenario, despite plans to ramp up defense spending over the coming years.
The optimistic scenario released Tuesday by the Cabinet Office assumes real gross domestic product will grow around 2% annually in the medium and long term, and that tax revenues will continue to rise. That scenario compares with average growth of around 0.6% in the la
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