The minutes of the December meeting of the Federal Open Market Committee (FOMC) have shown a distinct and sudden shift towards a more hawkish stance. The reduction of the pace of net asset purchases (tapering) has been stepped up, the first rate hike is expected to come earlier and the FOMC participants favour an early start and a faster pace of quantitative tightening (QT). Although they are more relaxed about QT than in 2017, it remains a tricky operation. The challenge will be to find the right balance between QT and the number of rate hikes in order to bring inflation under control without jeopardizing growth. History shows that achieving a soft landing is difficult.
With less than two weeks to go before Italy’s presidential election – the first round of voting takes place on 24 January – a candidacy of the current Prime Minister, Mario Draghi, remains a distinct possibility. If Mr Draghi becomes Italy’s president, this would probably have repercussions for the current governing coalition, although it is not currently possible to predict what they might be. In the meantime, Covid-19 cases are continuing to surge, with around 170 000 new contaminations recorded in mid-January. This has prompted the government to make vaccinations compulsory for people aged over 50.
The fairly substantial upgrade to Spain’s Q3 GDP figures underlined again the problems that the Spanish statistical office (INE) is currently facing when collecting data. To recap, third-quarter growth was revised up from 2.0% q/q to 2.6% q/q and this follows a large downgrade for Q2, from 2.8% q/q to 1.1% q/q. Employment will remain in the spotlight in 2022, since it offers a parallel measurement of economic activity and one that is currently more accurate than GDP.
One year after the UK’s effective withdrawal from the EU Single Market, the balance of opinions about the country’s new solo adventure has never been so negative (50% of the population believe that it was a bad decision; only 38% think the opposite, with 12% not offering an opinion). Although the shock of the Covid-19 pandemic makes analysis harder, the costs of Brexit are clear in a number of trends, starting with figures for international trade.
The weekly number of new Covid-19 cases remains very high in most regions because of the Omicron variant. On a weekly basis, the highest number of new cases in a single country was in the United States. France was next, followed by India, Italy, the UK, Spain, Argentina and Australia. On the mobility front, visits to retail and leisure facilities remain on a downward trend in Germany, Belgium, Italy, France, Spain, the US and the UK, although the most recent numbers show an uptick. In Japan, mobility is falling fairly sharply after previously showing positive momentum.
