The rush of the financial markets is accompanied by a sharp decline in government bond yields. Those on two-year Treasuries fell to 4.32% from 4.62%, in what is the largest daily decline since 2008. In Italy, the spread between BTP and Bund closed below 200 points (199 points), with the yield which falls by 28 basis points to 3.99%, reaching the levels of mid-September last year.
The data on the trend in consumer prices allowed investors to breathe a sigh of relief: in October, inflation slowed to 7.7% from 8.2% in September, marking the smallest increase since January. The core index, net of energy and food and monitored by the Fed, was also better than expected: it rose by 0.4%, less than the + 0.6% expected.
The cooling of the consumer price rally signals that the Fed’s shock recipe is working e eases the pressure on the central bankgiving it the ability to slow down the rate of interest rate hikes after the six squeezes launched since the beginning of the year, including the four consecutive 75 basis points. At the next meeting on 13 and 14 December, the Fed will also have the November price data available and therefore will be able to count on a more complete picture to decide its moves.
Analysts are betting on a 0.5% increase in the cost of money, with which the Central Bank will be more dovish but at the same time continue its battle against inflation which, while slowing down, remains high and threatens economy, for which the specter of a recession remains alive. Indeed, the path to a “soft landing” continues to narrow, leaving room for fears of an economic contraction for the next year.
The crusade against expensive living continues unchallenged even at the ECB. The Governing Council of the ECB “is ready to adapt all its tools within its mandate to ensure that inflation stabilizes at the 2% medium-term target“, reads the Eurotower economic bulletin, in which it is noted that the most recent data on the euro area economy” confirm risks for the economic growth prospects clearly oriented downwards, especially in the short term “despite positive signs on the world scenario.
To certify a slowdown in the world economy is Moody’s. The rating agency has cut its estimates on global GDP in 2023, forecasting one for the G20 countries that will stop at 1.3%, compared to the previous forecast of 2.1%, and slowing down from +2. , 5% expected this year. Moody’s therefore estimates a decline in GDP in Germany (-1.8%), France (-0.7%), Great Britain (-0.5%), while the US will grow by a modest + 0.4%. For Italy – where industrial production fell by 1.8% in September – forecasts are cut from ‘zero’ growth to a contraction in GDP of 1.4%.
The global economy slows down “in the presence of extraordinarily high levels of uncertainty – explains Moody’s – generated by persistent inflation, a tightening of monetary policy, fiscal challenges and geopolitical changes. “For now, however, the expected economic slowdown and possible recession do not seem to stir: the forecast of a less aggressive Fed is comforting , given that so far the US central bank has been held to be the main culprit of a possible recession.
