Investment Institute
Weekly Market Update

Take Two: Fed’s Powell signals aggressive moves, IMF cuts global growth forecast

  • 25 April 2022 (3 min read)

What do you need to know?

US Federal Reserve (Fed) Chair Jerome Powell signalled more aggressive policy ahead and said a 50-basis-point hike would be “on the table” when the central bank meets next month. Speaking at a debate hosted by the International Monetary Fund (IMF), Powell said high levels of inflation meant “it is appropriate to be moving a little more quickly.” Meanwhile, the IMF cut growth forecasts to reflect the impact of rising prices and Russia’s invasion of Ukraine. It now expects global growth of 3.6% in both 2022 and 2023, respectively 0.8 and 0.2 percentage points lower than it projected in January – and down from the 6.1% growth estimated for 2021. 

Around the world

China’s economy grew by more than expected in the first quarter (Q1) with GDP up 4.8% from a year earlier, after rising 4.0% in Q4. The resilience, however, masked difficulties in March that will likely also impact Q2, including lockdowns to deal with new coronavirus outbreaks and the effects of the Ukraine crisis. March industrial production and Q1 fixed asset investment were also ahead of expectations. However, retail sales fell by 3.5% last month, the steepest drop since April 2020, while the jobless rate in 31 major cities reached a record 6%. 

Figure in focus

Consumer confidence data for the Eurozone surprised to the upside, even though it remained well below its long-term average. The measure stood at -16.9 for April, up from -18.7 in March and beating expectations for a further fall to -20. The improvement came after six straight falls in confidence as the bloc wrestles with inflation pressures and the impact of the war in Ukraine. The final inflation reading for March in the Eurozone was nudged lower, to 7.4% from 7.5% previously. Elsewhere, retail sales data for the UK showed an unexpectedly sharp dip in March, alongside consumer confidence which fell sharply on the month and was close to the all-time low in 2008.

Words of wisdom

Beige Book: The US Fed’s commentary on current economic conditions, named after the colour of the document’s cover. Using information gathered from the Fed’s 12 districts, it details anecdotal trends which official data may not yet reflect. Last week’s Beige Book reported that businesses were less confident about the future thanks to sustained inflationary pressures, supply chain issues in China and the war in Ukraine, while many reported significant turnover of staff, as workers left for higher wages and more flexible schedules elsewhere.

What’s coming up

Monday sees the release of Germany’s closely watched Ifo Business Climate measure for April. On Tuesday the latest US S&P/Case-Shiller Home Price index is published while Australia’s inflation numbers for Q1 land on Wednesday. An advance estimate of Q1 US GDP growth is published Thursday, as are a spate of Eurozone data for April including Services, Industrial and Economic Sentiment indices; the Bank of Japan also meets to decide on interest rates. On Friday flash estimates for the Eurozone’s Q1 GDP growth and April inflation data arrive. 

 

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