Inflation in Australia has reached a 30-year-high. World Bank cuts growth forecast for most countries

In his speech at a banking symposium in Sweden, Federal Reserve Chairman Jerome Powell provided no new information on monetary policy but pointed to the Central Bank’s resolve, saying that unpopular decisions may be needed to lower inflation. This is in line with comments from other US Federal Reserve officials: San Francisco Fed President Mary Daley and Atlanta Fed President Rafael Bostic are insisting that the US Fed will hold rates higher for a longer period of time. Investors are trying to predict the next steps of the major central banks. The main factor will be the US inflation data, which will be released on Thursday. The decline in consumer prices will likely force the US Federal Reserve to lower the pace of rate hikes to 0.25%.

The World Bank lowered its growth forecasts for most countries and regions and warned that more adverse shocks could lead to a global recession. Global gross domestic product will likely increase by 1.7% this year. This would be the third-worst result in three decades. The bank also cut its growth estimates for 2024. Among the main reasons are persistent inflation, high-interest rates, Russia’s invasion of Ukraine, and lower investment.

ECB board spokeswoman Isabelle Schnabel said yesterday at the International Symposium on Central Bank Independence that the ECB will continue its rate hike cycle and that rates should rise significantly. With the Fed’s rate hike cycle coming to an end and the ECB still operating at full power, the rate differential is likely to strengthen the euro.

Crude oil prices rose slightly on Tuesday. Oil traders are waiting for the key data on US oil inventories, which are expected to decline. Against the background of the opening of China (the largest oil importer), it may be a trigger for oil to rise.

Asian markets traded without a single dynamic yesterday. Japan’s Nikkei 225 (JP225) gained 0.78%, China’s FTSE China A50 (CHA50) added 0.11%, Hong Kong’s Hang Sengv(HK50) ended the day down 0.27%, India’s NIFTY 50 (IND50) decreased by 1.03%, and Australia’s S&P/ASX 200 (AU200) ended the day down 0.28%

China is considering allowing local governments to borrow more debt for infrastructure projects. Base metals, especially copper, rose on the prospect that China will resume higher levels of industrial production after the economy opens. A revival in consumer demand is likely to lead China to improve international relations as well. The focus this week will also be on China’s inflation data for December. The country’s slowing economic growth is expected to lead to deflationary trends.

The consumer price level in Australia rose to a 30-year high. On an annualized basis, consumer prices rose from 6.9% to 7.3% (7.2% expected). Rising inflation will likely lead to further tightening of policy by the Central Bank, which will provide additional support to the Australian currency.