Macroeconomic & Geopolitical

Markets Testing Central Bank Resolve

August 2022 – 3 min read

Despite hawkish comments by Fed officials this week, markets continue to price in a more dovish path for rates. The BoE hiked 50bps and downgraded its economic outlook, calling for a U.K. recession in Q4. Eyes will be on U.S. CPI next week to gauge whether inflation is peaking.

Watchlist

markets-testing-central-chart1.jpgArrows indicate consensus forecast compared to the previous period. Local dates of release.

U.S.
  • We will watch July CPI, which is likely to remain elevated given broad-based price pressures.
  • The University of Michigan Sentiment index will be watched closely as well, to help gauge consumers’ longer-term inflation expectations, which have so far remained fairly well-anchored.
Europe
  • Military and economic responses to Russia’s war in Ukraine remain at the top of the watch list as the risk of a significant disruption to energy deliveries in Europe increases.
  • Industrial production in the EA and the U.K. will show whether the economy is resisting uncertainty, price pressures, and central bank tightening.
  • U.K. Q2 GDP might deteriorate.
Asia Pacific
  • China credit growth will likely soften as government bond issuance and mortgage activity slowed.
  • China CPI is expected to rise despite energy price cuts, amid a sharp increase in food prices. Core CPI is likely to remain manageable on easing demand, however.

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Kathryn Asher

Associate Director, Economist

Agnès Belaisch

Managing Director, Chief European Strategist

Matteo Cominetta

Director, Economist

Bonnie David

Assistant

Christian Floro

Associate Director

Anna Hanley-Walsh

Analyst

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