Economic

Despite a gloomy economic environment this year, equity markets enjoyed a period of very welcome optimism this summer. In the U.S., the S&P 500 Index staged a strong rally from mid-June to mid-August, bolstered by hope that inflation was peaking, which in turn raised expectations that the Federal Reserve (Fed) could pivot to a more dovish monetary policy stance. We believe … [Read more...] about Fed’s inflation fight likely to persist

The Consumer Price Index (CPI) came in essentially flat in July (actually down a very slight -0.02%), led by a roughly 8% decline in petroleum products. Outside of food and energy, the so-called core CPI rose 0.3%, also a substantial slowing from the prints of recent months. While the core CPI rose more than the headline number, it is worth noting that the bulk of that gain … [Read more...] about Some relief in latest US inflation report

The European Central Bank (ECB) has raised its interest rates for the first time in 11 years and it has done so in an urgent manner. Despite signalling a 25 basis points (bps) rise at its last governing council meeting, the ECB opted for a more aggressive 50 bps increase instead, taking the deposit rate up to zero, the main refinancing rate to 0.50% and the marginal lending … [Read more...] about ECB plays catch-up as it ends era of negative rates

If you follow the financial press, the conventional wisdom has come to the simple conclusion that the way to fight inflation is raising interest rates. Unfortunately, this is just not true. Yes, raising rates may slow the economy, but that alone won’t fix inflation. Starting in 2009, for seven years the Federal Reserve held the federal funds rate at zero and yet inflation … [Read more...] about How to fix inflation