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Weekly Economic & Financial Commentary: Global Central Banks Continue Along Their Rate Hike Paths

Summary

United States: Price Pressures Improving Gradually Amid Resilient Economy

  • The November release of the ISM services index kicked off the week with a surprisingly strong reading on the U.S. economy. Various price metrics released this week showed some continued signs of inflation cooling, but gradually rather than rapidly.
  • Next week: CPI (Tue), Retail Sales (Thu), Industrial Production (Thu)

International: Global Central Banks Continue Along Their Rate Hike Paths

  • The Bank of Canada raised its policy interest rate 50 bps at this week’s meeting, but signaled that further rate hikes would be increasingly data-dependent. Meanwhile, the Reserve Bank of Australia raised its policy rate 25 bps without offering any clear indication of an end to rate hikes. We expect Australia’s central bank to tighten policy further next year. The Reserve Bank of India also hiked interest rates and should raise rates further in 2023.
  • Next week: China Retail Sales & Industrial Output (Thu), Bank of England (Thu), European Central Bank (Thu)

Interest Rate Watch: The Fed Set to Hike 50 bps This Festive Season

  • We expect to see the fed funds rate rise 50 bps to a range of 4.25%-4.50% at the conclusion of the Federal Reserve’s Open Market Committee (FOMC) meeting on December 14. This represents a significant hike over the current range of 3.75%-4.00% but is still a downshift from the four consecutive 75 bps hikes at the prior four FOMC meetings.

Credit Market Insights: Consumers Continue to Draw on Credit

  • Consumer credit grew $27.1 billion in October, registering a 6.9% year-over-year gain. This continued rise in new debt is the newest installment in a troubling trend for consumers, as they appear increasingly willing to both borrow and draw down savings in order to fund consumption habits.

Topic of the Week: No Money, More Problems

  • This week, we focus on the personal saving rate. There has only been one month over the past 60 years in which consumers set aside less of their income than they did in October. That’s both remarkable and worrying for the outlook.

Full report here.

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