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Rate cuts ahead?

Almost 18 months ago, the biggest global concern was inflation. In June 2022, the U.S. printed a 8.9% and several countries in Europe were dealing with double digits CPIs, mainly due to Energy spikes. But central banks took action and started raising interest rates and reducing balance sheets, and as a result, inflation is clearly trending down. In the chart below, you can see how, with the exception of Japan, G7 members cpi trend is headed to the 2% Valhalla (Italy is already there) at a faster rate than it increased since 2021. Have central banks overdone it and we are headed to deflation? China is already there (-0.2% YoY) and soft indicators point to weakness both in Europe and to some extent in the US. It would appear that not only are we done in terms of #ratehikes, but we might be closer than we think to economic stimuli.


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