Intesa Sanpaolo: The ECB could decide on a 75 basis point hike at its next monetary policy meeting on 8 September.
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Weekly Economic Monitor – 2 September 2022
Intesa Sanpaolo – Research Department
The rate hike could continue at a fast pace until December, then slowing down in early 2023 to stop just above 2%.
United States – Will the Fed cause a recession? Despite the clear slowdown observed since the beginning of 2022, the US economy is still growing, with inflation at elevated levels and a tight labour market. The Fed has committed to restore inflation to 2%, aiming to cool demand by implementing a long-lasting restrictive monetary policy. The outcome makes a 2023 recession ever more likely . The absence of financial imbalances, and the solid balance sheets boasted by households and businesses alike, suggest that a possible cyclical turnaround could prove relatively shallow and less violent than was the case during the previous three recessions.
The week’s market movers
In addition to the ECB meeting, the focus for the next week in the Eurozone will be on Friday’s Extraordinary EU Council, convened to seek solutions to rising energy prices. On the economic data front, the first industrial production figures for July will be published, which are expected to show a contraction in both Germany and France. In the Eurozone as a whole, retail sales may show only a partial rebound in July after June’s decline, while the final estimate may report a slight upward revision of GDP growth in Q2. Also on the calendar are the final readings of the August services PMI and the first estimate for Italy, which should be consistent with a contraction in economic activity.
Quiet week ahead in the United States in terms of data releases. The only noteworthy information will be provided by the August services ISM, forecast to worsen while staying in expansionary territory, and the July trade balance, that should show a sharp narrowing of the deficit.
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