Equities endured a challenging 2022 due to geopolitical headwinds, high inflation, and the Fed’s aggressive interest rate hikes. With the central bank raising interest rates to the highest level since 2008, inflation showed signs of cooling off in the last three months of 2022.
Inflation came below analyst expectations for the third consecutive month in December, as the Consumer Price Index (CPI) increased by 6.5% over last year and decreased 0.1% sequentially. Although progress has been made in bringing inflation down from its high of 9.1% year-over-year rise in June, the central bank remains committed to bringing inflation down to its 2% target.
Moreover, the U.S. jobless claims for the week ended January 7, 2023, fell to their lowest level in more than three months, signaling continued tightness in the labor market. Minutes from the Fed’s policy meeting in December showed that the central bank officials expect higher interest rates to remain this year.
Therefore, a pause in interest rates is highly unlikely this year. Hence, the economy and the stock market are expected to remain under pressure.
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