Inflation in developed countries like the U.S., Eurozone, and China is slowing, while Japan is on the rise. At the end of last year, many IB’s main theme this year is “Hard Landing vs Soft Landing”. However, until recently this year, whether inflation has continued and still a major concern in the financial markets. Inflation in major countries is expected to slow down due to tight monetary policy.
U.S., Eurozone: Rates rise in Q2 – Q3, Japan: YCC adjustments, China: Some easing inflation in the U.S. fell sharply (‘8.0% in 2022 → 3.8% in 23). Policy rate hikes +25 to +50 basis points through Q2. Eurozone inflation slowed slightly (8.4% → 5.6%) with policy rate +100 bp for 2nd – 3rd quarter. Inflation in Japan is expected to slow down (2.5% → 2.1%). In addition, monetary policy expected to fine-tune Yield Curve Control policy. Unlike other major countries such as China, inflation is expected to rise further (2.0% → 2.3%). Monetary policy raises possibility of reserve ratio and mid-term policy rate cut for stimulus purposes.
China reopens international raw material prices rebound, solid job market in developed countries. Demand, which had been suppressed by Zero Corona, could surge and stimulate prices. Meanwhile, expectations for global demand, prolonged Russia-Ukraine war, abnormal weather such as El Nino, etc. Concerns that tight job markets in major countries will stimulate wage inflation. Global financial conditions have improved significantly since October, and the extent of deterioration is limited despite the SVB crisis. This is an inflation factor, which may cause difficulties in the central bank’s policy management. Monetary policy uncertainties might continue in major economies if inflation is more downwardly than expected or rebounding. Increased volatility in the financial market and concerns over an economic recession may be raised simultaneously.
