As expected, the Fed lifted its target for its benchmark rate by 25 bps to a range of 4.5% to 4.75% yesterday. The move follows a half-point increase in December and four jumbo-sized 75 bp hikes prior to that, which amounted to their most aggressive tightening campaign in four decades. The central bank also said that ongoing increases in the target range will be appropriate in order to return inflation to its target of 2%. The positive out of yesterday’s hike came after FOMC members said that the extent of future increases will depend on a number of factors and noted that inflation has eased in recent months. Across the pond, the Bank of England just announced its own rate hike of 50 bps to its key interest rate, but also signaled it may soon pause as inflation eases and the economy slows. 

Inflation in Europe slowed more than expected in January, reigniting the argument over how much further the ECB should increase interest rates. Last month’s inflation reading came in at 8.5%, less than the 8.9% estimates, thanks in part to lower energy prices. Still, core measures of underlying inflation which exclude volatile items like energy remain at an all-time high of 5.2%. More dovish ECB officials will certainly use these numbers to push for an easing in the pace of rate hikes following today’s anticipated half-point move. Bolstering dovish ECB officials’ arguments include falling natural gas prices amid a mild winter and expectations of a similar downshift by the Fed and a pause in the BoC’s monetary-tightening cycle. 

Vacancies at U.S. employers rose at the end of last year, with the number of available positions rising to a five-month high of just over 11 million in December from 10.4 million in November. This highlights the solid appetite for labour and subsequent wage pressures, one of the last hurdles to ease inflation. Data also shows that job openings also increased in retail trade and construction while vacancies decreased in the information sector. Overall, the ratio of openings to unemployed people rose to a near record-high 1.9 in December from 1.7 a month earlier and much higher than the pre-pandemic number of around 1.2. And if that wasn’t enough to worry the Fed, applications for unemployment benefits in the U.S. also fell for the fourth time in five weeks, underscoring the broad resilience of the job market. Initial unemployment claims ticked down by 3,000 to 183,000 in the week ended Jan. 28, while continuing claims, which include people who have already received unemployment benefits for a week or more, fell to 1.66 million in the week ended Jan. 21. 

HIIT or sculpt? If you answered neither, you can move onto the diversion now.  If you answered the latter, you are part of a trend that is choosing more moderate exercises that focus on strength training and mobility (must keep those wobbly knees and hips strong).  According to the WSJ, fewer people are choosing high calorie burning HIIT (high-intensity interval training) workouts and instead opting for sculpting classes such as pilates, yoga, and strength training. Based on the subscription-based fitness platform ClassPass, bookings in the “sculpting” category grew 280%, vs. HIIT growing 59%.  Either way, more people have returned to gym, which is a win-win for gyms our health. Happy sculpting.   


Diversion: Fun starts now...not. 

Global sugar prices have been on a tear, soaring this week to the highest since late 2016, as prospects for weaker India exports, plus higher gasoline prices in Brazil (which may prompt sugar mills to boost ethanol production at the expense of sugar) sparked concerns about a near-term global shortage. However, the price surge may be tested as Thailand, the world’s second-largest sugar exporter, will ramp up production and shipments, and will produce 11.55 million tons of sugar this season, up 14% from the previous year. This will lead to greater exports, with the domestic market typically consuming about 2.5 million tons and selling the rest overseas.  

The Bank of England raised its key interest rate this morning for a 10th straight policy meeting but signaled it may soon pause that series as the annual rate of inflation falls and the economy falters. Unlike the Fed and the BoC, who raised by 0.25%, the BOE hiked 0.50% bringing its bank rate to 4% from 3.5%. The BOE said further rate rises are possible, but only if inflation threatens to be high for longer than it currently expects it to be. The central bank had previously set a lower bar for further rate rises, but also warned of the risk that a tight jobs market and big pay rises would keep inflation higher for longer than it anticipates. The decision came with a bleak outlook, with the central bank forecasting a recession in 2025 and supply potential in the economy a little more than half of its previous estimate.