Harvest Global Markets :

The IMF’s latest release of the World Economic Outlook indicates that there is a significant decline taking place in global economic activity and inflation is at its highest level in many years. The projection is adversely impacted by the rising cost of living, tightening financial circumstances across the board, Russia’s invasion of Ukraine, and the persisting COVID-19 epidemic.

The Gross Domestic Product (GDP) is considered the most complete measure of prices in an economy and on Thursday, October 27 the US government will release its most recent numbers for the third quarter of 2022 and the most updated numbers on their national debt. Economists and investors are looking forward to seeing how deep of an economic contraction has taken place between Q2 and Q3.

The data from the Federal Reserve of St.Louis (a regional reserve bank of Washington DC) indicate that the consensus forecast is that U.S. real GDP growth will return to positive territory following declines in the first and second quarters of 2022. However, The Fed has been clear on its stance of maintaining a restrictive monetary policy and continue loosening the labor market to pursue its goal of restoring price stability and bringing inflation down to its target rate of 2%. In response, the interest rate-sensitive housing sector is also seen to weaken, and equity prices have declined sharply as well.

Policymakers at Fed do realize that the red-hot inflation is taking its toll on lower-income Americans the most and hence there have been serious considerations regarding another 75-basis points rate hike in the next FOMC scheduled on November 02, 2022. They reiterate that rate hikes are likely to continue and higher rates will prevail until the problem is showing signs of resolving and the US economy is moving towards achieving a soft-landing.