Macroeconomic Round-Up

A reminder of economic fundamentals may be useful when considering financial markets. 2022 is a year of reaction to 2021. Last year saw perhaps the strongest demand surge for goods in 75 years. This year is about normalisation. The important point is that there is still a strong level of demand.

Inflation is also expected to normalise over time - and the cost of living of many people is lower than headline consumer price inflation (giving more spending power than is popularly supposed).

Nonetheless, liquidity is not needed in the way it was, so quantitative policy could be ended. Interest rates do not need to slow economic growth (that will happen regardless of central bankers) but could move to more normal levels [UBS]. A forecast position put forward by both the World Bank and IMF.