A high inflation regime is feared by central bankers. Covid Zero is here to stay, according to the president. The billionaire factory is broken. Today is what you need to know.
The world is moving to a regime of higher inflation that will force central bankers to change their approach to monetary policy. Powell promised that price increases wouldn't become entrenched.
The relaxation of China's travel restrictions this week was seen as a sign that the country's Covid Zero policy was about to end. It isn't so fast. The president made a symbolic visit to the central Chinese city of Wuhan, where the virus first emerged, to proclaim Covid Zero the most effective policy for the country. He said that China would rather have a short-term impact on economic development than have a long-term impact on people's health. The president is about to leave China after almost a year at home.
The bond market moved to price in a half-point rate cut in the Federal Reserve's benchmark rate at some point in the future. Consumers are worried that higher food and energy costs will lead to an economic downturn. Powell believes differently. He said that the economy is in a good place.
NATO agreed this week to increase its military presence in Europe in response to Russia's invasion of Ukraine. More than 300,000 troops have been put on high alert as Sweden and Finland prepare to join the alliance. NATO leaders identified China's increasing military presence as a "challenge" for the first time and highlighted Beijing's partnership with Russia. That all means something.
Asia is still among the top places to be at this point in time. All of the top performers are successfully executing a strategy that most of the world has settled into: Accept the virus is here to stay. You can get the final ranking here.
The outlook for the coming months doesn't look much better as a miserable quarter nears its end. Concerns are growing that the Federal Reserve Chair and his peers are too confident in the economy's ability to avoid a recession. How many hikes, how much pain, and whether or not we'll end up with rate cuts next year are what the volatility index shows. As central bank actions remain center stage, the currencies and bonds are showing more fear.
The lower readings for the index of US equity volatilities could be concerning. Stock investors may be expecting the lower grind to continue. That is understandable with the policy uncertainty that plagues the outlook for all investors.
Garfield Reynolds is based in Australia.
Garfield Clinton Reynolds helped with the project.
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