The NEI team examines what drove markets to new lows through September including continued central bank tightening, weakening global growth forecasts from the OECD and the panic caused by the UK government’s new economic program.
Central banks stay focused on inflation mandate
Central banks continued to press forward with aggressive rate hikes as they remain laser focused on combatting persistently high inflation. Synchronized monetary tightening is resulting in weaker economic forecasts for the rest of the year. Though easing commodity prices may present a silver lining, higher core inflation points to higher rates ahead.
New UK economic program causes market chaos
New UK Prime Minister Liz Truss unveiled a new economic program aimed at sparking economic growth that included aggressive tax cuts sent UK bond and currency markets into a panic. As a result, UK bonds experienced their worst quarterly drop ever and the Sterling hit a new low against the US dollar, causing the Bank of England to intervene.
Global economic growth forecasts weaken in 2023
Global economic growth forecasts weaken in 2023The OECD forecasts weaker economic growth for the remainder of the year and further weakness in 2023. The slowing growth is due to the many factors that have plagued markets throughout the year including rising energy and food prices, persistent inflation and tightening monetary policy. China appears to be the only country set to rebound in 2023.
