Written by Shane Balkham.

The last full week of January was relatively quiet for markets.  With the arrival of the Year of the Rabbit, many Asian markets were closed for the Chinese Lunar New Year celebrations.  In the US, the Federal Reserve was in a blackout period ahead of the rate setting meeting next week.  In fact, this week is considerably more interesting with the Federal Reserve, Bank of England, and European Central Bank all having their first policy meetings of 2023.  Expectations are for a slowing in the pace of rate hikes, with a potential pause at some point this year.  More on that next week.

There were some interesting data releases though, with company earnings and guidance reporting lower, managing expectations for a below-trend growth environment in 2023 and preparing for a recession.  However, fourth quarter growth for the US beat expectations, with GDP growing at an annual 2.9%, but underneath this figure we saw signs of weakness as consumer spending was subdued.

On a brighter note, US core PCE (Personal Consumption Expenditure) inflation data was published on Friday.  Although it showed a slight uptick from November (moving from 0.2% to 0.3%), the annualised figure came in at 4.4%, significantly lower than the peak of 5.4%.  This is still above the Federal Reverse’s target, but definitely moving in the right direction and arguably faster than expected.  This could be sufficient evidence for policy makers to tone down the pace of rate hikes in this week’s meeting.

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