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Central banks in developed markets reinforced the message that rates will need to stay high for some considerable time to bring inflation back to target, dashing hopes of substantial cuts next year. In contrast, Brazil cut rates for the second time this cycle, while Poland lowered borrowing costs for the first time in more than three years.

Central banks in developed markets reinforced the message that rates will need to stay high for some considerable time to bring inflation back to target, dashing hopes of substantial cuts next year. In contrast, Brazil cut rates for the second time this cycle, while Poland lowered borrowing costs for the first time in more than three years.

China’s economic activity remained under pressure. Exports tumbled 14.5% year on year in July, the steepest fall since the start of the pandemic, while imports fell 12.4% on a year-on-year basis.

After the pause in June, the US Federal Reserve (Fed) raised interest rates by 25 basis points in July, taking the federal funds rate to a range of 5.25-5.50%, a 22-year high.

The US Federal Reserve (Fed) paused its rate-hiking stance for the first time in 14 months as it waits to see how the significant hikes already implemented will feed through into the economy.

Semiconductor stocks surged as artificial intelligence (AI) and its applications became the focus of investor interest in May. Shares of NVIDIA surged as it raised its sales guidance significantly.

Fears of a banking crisis faded, with large US and European banks announcing sizeable first quarter profits. However, US investment bank JPMorgan Chase was forced into an emergency rescue of California-based regional lender First Republic Bank.

Financial markets were rocked by the collapse of two niche US lenders: crypto-focused Signature Bank and SVB Financial, the bank of choice for California-based start ups.

Tensions between the US and China rose after the US shot down a balloon, which it alleged that China was using for the purposes of espionage. The US also warned China against supplying Russia with weapons, saying it could risk escalating the war in Ukraine.

The headline rate of inflation continued to fall across most economies. US consumer prices rose at an annual rate of 6.5% for December, the lowest rate since October 2021, while headline eurozone inflation eased to 9.2% compared to a peak of 10.6% in October 2022. 

China pivoted away from its zero-Covid policy, with the authorities refocusing on consumption and industries such as technology and property. Infection levels surged as testing and quarantine requirements were removed.

China might be easing its strict zero-Covid policy, following a month of widespread protests and a sharp slowdown in economic activity. Despite record high infection levels, there appears to have been a shift in emphasis recently.

The International Monetary Fund issued a stark warning over the health of the global economy, saying it saw rising risks of a recession in 2023. Hopes rose that the deteriorating economic outlook might cause central banks to be less aggressive in raising rates to smother inflation.

In the UK, the new government, headed by former Foreign Secretary Liz Truss, froze energy costs and announced the largest tax cuts in 50 years in an attempt to stimulate growth. The spending was unfunded, causing the Bank of England to intervene as the British pound and UK bond prices tumbled amid fears of unsustainable levels of UK borrowing.

Cryptocurrencies have not had the best environmental track record and it’s easy to understand why. The primary argument for crypto not being ESG-friendly stems from the processing power required to mine the cryptocurrency and complete transactions in it.

China struggled to contain broad-based Covid outbreaks, as it stuck to its strict zero-Covid policy. The People’s Bank of China cut borrowing costs as economic data revealed that growth remains weak in the face of sporadic lockdowns, the ongoing property crisis and a severe drought which has led to power cuts.

The US Federal Reserve (Fed) raised interest rates by 75 basis points for the second time in two months, taking them to a range of 2.25% to 2.5% - a level that is considered to be ‘neutral’ for the economy.

The US Federal Reserve (Fed) raised interest rates by 75 basis points in June, its largest single increase since 1994, and indicated that another substantial rate hike would likely be needed in July.

The European Central Bank (ECB) came under rising pressure to exit the negative interest rate policy it has held since 2014, with the first rate rise expected as early as July.

In China, the lockdown in Shanghai entered a second month and fears grew that Beijing could also be placed into lockdown. China’s zero-Covid policy could mean further supply chain disruption and might threaten the country’s 5.5% growth target for 2022.