Morning Brief – Inflation

Inflation

With markets as ever getting ahead of themselves by many having decided that the inflation peak is a yesterday thing, there is a dawning realisation that with the current levels of USA 6.5%, 9.2% UK and 10.4% EU as at Dec 2022, inflation is not only well above target of 2% but is still historically very high. So extrapolating from the three choices for inflation of permanence, persistence or being temporary, the conclusion is that it is certainly not temporary nor is it in any way palatable for it to be permanent, inflation must on that basis be deemed to be persistent. And that means that either draconian steps must be taken to return it to the 2% target which would most certainly precipitate a deep and long recession, or, there will have to be a relaxation of the inflation target to 3-4%. That has huge implications for the likely levels of interest rates-there will not be a return to ultra cheap money and the likely base range for interest rates will be 4-5% for the foreseeable future.

US Gross Domestic Product

The reason that yesterday’s US Q4 GDP release was so closely watched was because it would confirm or refute the health or otherwise of the US economy as well as complete the picture for 2022 which while expected to be slower than the 5.9% growth recorded in 2021, was still expected to be respectable in the light of recessionary fears. Expectations for Q4 were for 2.6% growth following the 3.2% in Q3. In the event Q4 came out at 2.9% which was better than expected and the annual rate for 2022 was reported at 2.6%. While maybe not conclusive that the Federal Reserve will indeed be able to achieve a soft landing for the US economy, the market was relieved and US Dollar rallied EUR/USD 1.0890.

India

The 74^th Republic Day since 1949 when India became independent was celebrated yesterday with splendid parades in Delhi showcasing India’s rude economic health with President Sisi of Egypt as Guest of Honour. USD/INR 81.50.

Meta

The owner of Facebook and Instagram, Meta has relented and will be letting Donald Trump back into his accounts and therefore access to the two social mediums after a 2 year ban. The announcement was made by Meta supremo Nick Clegg on the premise that the public deserved to be able to hear what their politicians were saying. Some might say that rather depends on the politician but Nick Clegg knows rather better than most based on his personal political experience about that.

New Seekers

With those saccharine dulcet tones remembered by readers of a certain vintage the New Seekers released their hit “I’d like to teach the world to sing” which went Gold this day in 1972 and was swiftly snapped up by the savvy media department of Coca Cola Inc. In those early days of commercial TV with few channels and a complete absence of content rich viewing, we were treated to the New Seekers several times an evening. For those who like the full sugar experience here it is:

I’d like to build a world a home
And furnish it with love
Grow apple trees and honey bees
And snow white turtle doves

I’d like to teach the world to sing
In perfect harmony
I’d like to hold it in my arms
And keep it company

I’d like to see the world for once
All standing hand in hand
And hear them echo through the hills
For peace throughout the land

That’s a song I hear
Sing it along
Let the world sing today
Over and over

I’d like to teach the world to sing
In perfect harmony

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

Click Here to Subscribe to the SGM-FX Newsletter