Q3 2022 Economic Commentary
Slowing growth and rising inflation
There have been some extraordinary and unprecedented moves in asset markets over recent weeks. The market volatility has been primarily driven by persistently high inflation data, which is leading central banks to raise interest rates to dampen demand but also growth.
The speed and breadth of rising inflation data has caught central banks by surprise. As such they are having to raise interest rates faster and by a far greater amount than was expected just a few months ago.
During October a degree of dovishness had subtly crept into Central Banks language. Officials in Canada, Australia, the European Central Bank and influential members of the US Federal Reserve (Fed) have suggested that the rate of tightening will slow. At the latest meeting of the Fed at the start of November, Chairman Jerome Powell announced that they were raising the base rate by 75bps to 3.75% – 4%. It marks a sixth consecutive rate hike and the fourth straight 75bps increase, pushing borrowing costs to its highest point since 2008