“A recession seems inevitable in Europe, while in the U.S. we will need to keep an eye on the Fed and assess how much economic pain it considers necessary to win the battle against inflation,” said William Davies, head of global investments at Columbia Threadneedle Investments.
Inflation in the US has begun to moderate and the downward trend should continue. The core CPI, meanwhile, is proving more resilient, but more stable or lower levels “will give the Federal Reserve the option to pause interest rate hikes in early 2023. We don’t expect a looser monetary environment as rates fall, but with some stabilisation, 2023 should be a different year,” adds Davies.
