In today’s briefing:
- CX Daily: Liu He Says China’s Economy Will Get Back to Normal in 2023
- UK: Slower Inflation Is Still Excessive
- EA: Energised HICP Drop into 2023
CX Daily: Liu He Says China’s Economy Will Get Back to Normal in 2023
New bank aims to shore up Chinese province’s corruption-plagued rural lenders
Liu He says China’s economy will get back to normal in 2023.
Chinese authorities seize fake Paxlovid anti-Covid pills.
UK: Slower Inflation Is Still Excessive
- UK inflation eased in Dec-22 to 10.5% and 13.4% on the CPI and RPI, broadly matching expectations. Clothing and games cheapened, offset by hospitality prices.
- High wage growth is stoking service prices, sustaining underlying inflationary pressures at levels consistent with a headline pace nearer 6% than the 2% target.
- We still expect the BoE to keep forcefully leaning against problematic second-round effects with another 50bp rate hike in Feb-23 ahead of critical wage settlements.
EA: Energised HICP Drop into 2023
- The final EA HICP inflation print confirmed the flash fall to 9.2% on German energy. Energy seems set to drive another decline in Jan-23, thereby surprising the consensus.
- Inflationary pressures narrowed in Dec-22. Nonetheless, underlying inflation is consistent with the headline rate settling between two and three times the target.
- Tight labour markets still threaten how swiftly this excess inflation might end. The ECB is naturally concerned and should hike by another forceful 50bp in Feb-23.
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