From Washington to Frankfurt to London and beyond, central bankers are approaching their final decisions of the year against a backdrop of unease at how the global inflation cycle is turning.

Policymakers from fully half of the Group of 10 jurisdictions of most-traded currencies are scheduled to meet in the coming days, and interest rates for 60% of the world economy will be set in a whirlwind 60-hour window.

Most notable will be the US Federal Reserve on Wednesday, followed on Thursday by central banks including those of the euro zone and the UK. Except for Norway, which may conceivably raise borrowing costs, most monetary officials are confronting financial-market pressure to explain why they seem unhurried about pivoting to monetary easing. (BBG - Continue Reading) 

When Federal Reserve Chair Jerome Powell met on an October afternoon with small-business owners in Pennsylvania, Julie Keene lamented how her family farm and food market had been blindsided by high inflation over the past two years.

“Predictability is just gone,” said Keene, co-owner of Flinchbaugh’s Orchard & Farm Market in Hellam, Pa. “It is very hard to operate a business in a world where there is not predictability.” Powell curtly told Keene he saw one clear solution: “We get inflation down.”

So far, so good. Inflation has fallen faster this year than many Fed officials anticipated after a hair-raising series of rate increases that none of them envisioned two years ago. The big questions now are about when the Fed can start cutting rates and by how much. The answers will matter greatly to households, markets and possibly the 2024 presidential election. (WSJ - Continue Reading) 

The S&P 500 Index will hit a record high in 2024 as the US avoids sinking into a recession, although a weaker consumer will mean the index gains less than this year’s 20% surge, according to Bloomberg’s latest Markets Live Pulse survey.

A median of 518 respondents expect the S&P 500 to climb to 4,808 points next year — topping its previous closing peak of 4,797 hit in January 2022 — and the 10-year Treasury yield to drop to 3.8% from this year’s high of 5%. More than two thirds of respondents indicated they don’t see a hard economic landing as the top risk to markets and majority expects Federal Reserve interest rate cuts to begin before July.

“US exceptionalism remains firmly in place,” said Aneeka Gupta, director of macroeconomic research at WisdomTree. “The key drivers are a more favourable economic backdrop versus China and Europe, improving earnings estimates and cheaper valuations for the equal-weighted S&P 500.” (BBG - Continue Reading)