Friday 29th July 2022

US GDP fell by 0.9 percent in Q2. On top of the 1.6 percent fall in Q1 that meets the technical definition of a recession. But Jerome Powell and Janet Yellen are keen to point out the downturn is not sufficiently broad based to be called a recession. Nonetheless it does signify a further weakening in the economy, which investors seem to be taking as a sign that the Fed won’t need to be as aggressive to counter inflation. NAB’s Gavin Friend says that although the market may be trying to lead the Fed in that direction, that’s not how Jerome Powell sees it and we can expect to see further significant hikes. Perhaps the same could be say for the RBA, with Australian retail sales continuing to rise and Treasurer Chalmers yesterday predicting inflation will peak at 7,75 percent, well above the RBA’s 7 percent forecast.