FNArena’s Weekly Insights – September 19 2022
In this week’s Weekly Insights:
-Are We There Yet? (Fat Chance!)
-Conviction Calls
-Research To Download
By Rudi Filapek-Vandyck, Editor
Are We There Yet? (Fat Chance!)
As is often the case, the most important developments across financial markets this month is what is not shown through share price movements.
On Monday morning ANZ Bank mailed out its latest economic forecasts, and the changes are quite noticeable:
“Based on current and expected price trends we now forecast a terminal fed funds range of 4.75-5.00% to be reached by Q2 2023, which is 100bps higher and almost six months later than we previously projected.”
In layman’s language: the Federal Reserve will be tightening for longer and pushing up interest rates a lot higher than previously assumed, which is not yet priced in by financial assets.
Equally important: the team of economists at ANZ Bank is now reviewing its forecasts for the RBA in Australia for a potential higher-and-longer scenario locally too.
It goes without saying, ANZ Bank is but one forecaster in a global world of many, but Monday’s update is indicative for the trend that started early in 2022 – and the same undercurrent has remained in place since: inflation is much stickier than assumed, central bankers will need to work harder to pull it back towards 2% again.
Just about every economic outlook has the US, and the world in general, either close to or in recession next year. Imagine what higher interest rates for longer will do for the risks of recession.
