January 24, 2023
United States:
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.
Europe:
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.
Asia:
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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