Archive

Outlook 2024: The Big Issue, Part 2

• Businesses in the US are beginning to take the possibility of Donald Trump winning the 2024 election seriously. However, even there, investors are giving too little thought to how to prepare through 2024 for the significant policy shifts at home and abroad that could quickly follow.

By Alastair Newton

Rates: The Old Lady is Not for Turning

• Most central banks held their rates in December, including the BoE. The MPC pushed back against dovish pricing with its forecasts and interpretation of the news.
• It also pointed to how the UK’s fundamentals are worse than in the US and Euro area, with excessive wages and underlying price inflation preventing a sustainable return to target.
• Three MPC members still favour a rate hike, and most of the rest have a hawkish bias. The BoE looks nowhere near a cut, and nor should it be. We see it on hold through 2024.

By Philip Rush

US Policy Rate 5.5% (consensus 5.5%) in Dec-23

• The FOMC's decision to maintain the current interest rate at 5.5% is an acknowledgement of a slowing yet resilient economy, with a particular focus on GDP growth rates and labour market conditions.
• Inflation, while easing, continues to be above the FOMC's target. The Committee is committed to bringing inflation down to 2% and is ready to raise rates again if inflationary trends do not align with their target.
• Ongoing transmission of past tightening to a slowing economy means the Fed's next move is likely to be a rate cut. FOMC members are as dovish as the economic consensus, but the market seems comfortable pricing more aggressive cuts.

US CPI Inflation 3.14% y-o-y (consensus 3.1%) in Nov-23

- US CPI inflation for November 2023 reached 3.14% y-o-y, marginally over headline market expectations but showing the slowest growth rate since June 2023.
- The deviation from the one-year average was 1.26 percentage points, indicating a lack of sustained inflationary pressures in the economy.