Intesa Sanpaolo: The ECB has raised its policy rates by 50bps, the least of the plausible options, but at the same time it has signalled that markets are not adequately discounting the potential for official rate hikes in the coming months..
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Weekly Economic Monitor – 16 Dezember 2022
Intesa Sanpaolo – Research Department
there will be further “significant” hikes, conducted at a “steady” pace. Moreover, the reduction of the APP portfolio will start in March.
FOMC : slower hikes, higher rates. The FOMC meeting brought a 50bps fed funds hike to 4.5%, and an upward shift of the dot plot, that now indicates a peak rate of 5.25% and a reversal in 2024. In our opinion, a “normal” 25bps hike phase will begin in 2023. The pace of the rate hikes is no longer crucial, and the focus has shifted to the peak and the duration of the restriction. The terminal rate will be decided based on the “totality” of incoming data, also taking into account the lags in the transmission of the monetary tightening.
The week’s market movers
In the euro area , the pre-Christmas week is rather poor in economic indicators. The most important data on the calendar is the German IFO, which is expected to recover for the third consecutive month in December, as well as the flash estimate of consumer confidence released by the European Commission (both indicators would, however, remain at levels well below the long-term average). In the Eurozone, wage growth is expected to have accelerated over the summer while the October construction output figure could benefit from above-average temperatures. Also on the calendar are final estimates of Q3 GDP growth in Spain and the Netherlands.
This week in the United States , the main data on the trend of the residential housing sector in November will be released, with home sales and housing starts still contracting sharply. Orders of durable goods in November should be supported by civil aviation, as opposed to weak contributions from the other sectors. Personal spending and personal income are estimated to increase in November at a more moderate pace than in October, while the deflator should confirm the slowdown of the monthly dynamic of the core index
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