Take Two: Fed indicates high rates for some time yet; Eurozone inflation accelerates
- 08 January 2024 (3 min read)
What do you need to know?
The Federal Reserve may ease monetary policy this year but warned interest rates could remain high “for some time” until inflation falls further. Minutes from its December meeting showed policymakers agreed the path of monetary policy “will depend on how the economy evolves”, with future rate hikes not ruled out. While market reaction to the minutes was muted, 2023 delivered better-than-expected returns; the MSCI World NR Index rose 24%, while the S&P 500 was up 26% including dividends, and the tech-heavy Nasdaq achieved 45%.1
Around the world
Eurozone annual inflation rose 2.9% in December, up from 2.4% in November; however, core inflation – excluding energy, food, alcohol and tobacco – fell to 3.4% from 3.6%, according to an official flash estimate. In addition, Eurozone manufacturing activity contracted in December for the 18th consecutive month. The final manufacturing Purchasing Managers’ Index (PMI) confirmed a slight rise to 44.4 in December from 44.2 in November – below 50 signifies a contraction. The bloc’s composite PMI remained unchanged in December at 47.6, signalling a moderate but consistent decline in Eurozone business activity.
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Figure in focus: Two billion
Globally, 2024 will be a politically-charged 12 months, with more than two billion people set to head to the polls – most by virtue of India’s elections during April and May. However, emerging markets overall will collectively hold 19 elections this year, with some of the most important contests taking place in Taiwan, South Africa and Mexico. The UK is also very likely to see a general election later in 2024 but the most consequential for the wider world is likely to be the US Presidential race on 5 November.
Words of wisdom
Floating turbine – An offshore wind turbine mounted on a floating structure enabling the turbine to generate electricity in depths of water that fixed turbines are not able to reach. Industry officials believe floating turbines could account for over half the UK’s target for offshore wind power generation by 2050 – notably, the amount of UK electricity generated by fossil fuels fell by 22% year on year in 2023, according to climate policy specialist Carbon Brief. Floating turbines may be a potential key technology in the green transition to help replace fossil fuels with renewable energy.
What’s coming up?
On Monday, a spate of Eurozone surveys will be published covering December, including the bloc’s Economic and Industrial Sentiment and Consumer Confidence indices. On Tuesday, the Eurozone also publishes its unemployment rate for November. On Thursday, the US releases its inflation figures for December, with China following up with its own numbers on Friday. In addition, the UK reports November GDP growth on Friday.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.