World Bank - Global GDP was cut from 4.3 to 4.1 but Stock still rise after Powel Testimony

World Bank - Global GDP was cut from 4.3 to 4.1 but Stock still rise after Powel Testimony

World Bank - Global GDP was cut from 4.3 to 4.1 but Stock still rise after Powel Testimony

Ayhan Kose, director of the World Bank's said "There is a pronounced slowdown underway, ..... Policy support is being withdrawn and there is a multitude of risks ahead of us." 

The World Bank is out with its latest economic forecasts: 

  • Sees developed economies growing 3.8% vs 4.0% in June forecasts
  • 2021 global GDP forecast 5.5% vs 5.7% in June
  • Sees 2021 Japan GDP at 1.7% vs 2.9% in June
  • Sees 2022 Japan GDP at +2.9%
  • China forecast of 5.1% vs 5.4% prior
  • Sees 2022 US GDP +3.7% +4.2% prior
  • Sees 2023 global GDP at 3.2%
  • A surge in omicron that overwhelms healthcare systems could trim another 0.7 pp from growth

Stocks grow consistent  SPX +0.92 Nasdaq 1,47 after optimistic Powel discourse

  • The main thing we can do is foster a strong employment market, consistent with our inflation mandate
  • In order to get a long expansion, we need price stability
  • We will use our tools to bring inflation back down
  • There are great benefits of a tight labor market
  • It is really time for us to move away from emergency settings
  • Doing so should not have a negative impact on labor market
  • We're not seeing the progress on supply-side issues that we thought -- that all forecasters thought
  • Over time inflation will subside, but the question is how fast
  • Inflation will last until the middle of this year
  • Fed has not made any decisions on the timing of normalization
  • This year I expect the Fed will raise rates, end asset purchases and perhaps later this year allow the balance sheet to shrink
  • We're going to learn a lot about the path of inflation
  • It will take 2-4 meetings to work through balance sheet decision (4th meeting is June 15)
  • Expects to see some relief on supply side later this year; if not there's a risk of inflation becoming entrenched
  • We believed we would see material relief on the supply side
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