December 5, 2022

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Inflation slows in the US, stock markets are flying

The rush of financial markets accompanies a Sharp drop in government bond yields. Those on two-year Treasuries fell to 4.32% from 4.62%, the biggest daily drop since 2008. In Italy, the spread between BTP and Bund closed less than 200 points (199 points), with the yield down 28 basis. point to 3.99%, and reached the levels of mid-September last year.

Data on the trend in consumer prices allowed investors to breathe a sigh of relief: In October, inflation slowed to 7.7% from 8.2% in September, the smallest increase since January. The core index, net energy and food monitored by the Federal Reserve, was also better than expected: it rose 0.4%, less than the +0.6% expected.

The easing of rising consumer prices indicates that the Fed’s shock prescription is working Reducing pressure on the central bankWhich gives it the ability to slow rate increases after six pressures launched since the start of the year, including the four in a row 75 basis points. At the upcoming meeting on December 13-14, the Fed will also have November price data available, so it will be able to rely on a more complete picture to determine its moves.

Analysts are betting on a 0.5% increase in the cost of money, with which the central bank will be more pessimistic, but at the same time continue its fight against inflation that, while slowing, remains high and threatens the economy, which is likely to happen. The recession is still alive. Indeed, the path to a “quiet down” is still narrowing, leaving room for fears of an economic downturn next year.

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The crusade against expensive living continues unchallenged even at the European Central Bank. The European Central Bank’s Governing Council “is ready to adapt all its instruments within its powers to ensure this.” Inflation stabilizes at the medium-term target of 2%.”, reads the Eurotower Economic Bulletin, in which it was noted that the latest data on the eurozone economy “emphasizes the risks to economic growth prospects clearly oriented to the downside, especially in the short term” despite positive indicators on the global scenario.

Moody’s testimony to the slowdown in the global economy. The rating agency lowered its estimate of global GDP in 2023, and forecast one forecast for the G-20 countries would stop at 1.3%, compared to the previous forecast of 2.1%, slowing from +2. 5% expected this year. So Moody’s estimates GDP declines in Germany (-1.8%), France (-0.7%), and Great Britain (-0.5%), while the US will grow by a modest +0.4%. For Italy – where industrial production fell 1.8% in September – expectations were lowered from “zero” growth to a contraction in GDP of 1.4%.

The global economy is slowing down Unusually high levels of uncertainty – Moody’s explains – resulting from persistent inflation, monetary policy tightening, fiscal challenges and geopolitical changes. “However, at the moment, the expected economic slowdown and a possible recession do not seem to provoke: the Federal Reserve’s less aggressive outlook is reassuring, given that so far the US central bank has been the main culprit of a possible recession.