November Wrap Up

Here’s what you need to know about what went down this month:

FOMC Minutes: Maybe it’s time to slow down

At the November 2nd FOMC meeting, members unanimously agreed to raise the Fed Funds rate by 0.75 percentage point to bring the key rate to 3.75%-4.0%. However, in the meeting minutes, it was also discussed that they could downshift to a rate rise of 0.5 percentage point at their next meeting, which is to be held on December 13-14.

What this means is the Fed is finally acknowledging its aggressive tightening over the last six months will take time to influence the underlying economy and that it may soon shift toward rate hikes of 50bps, 25bps, or even outright pause interest rate hikes, depending on how the economy reacts.

China: Covid fears lingers on

The dollar pulled back from strong overnight gains after investors moved toward the safe-haven currency, as the recent resurgence of Covid in China increased concerns.

The fact that China may further tighten restrictions, after seeing a surge in Covid cases and deaths from the virus were also recorded in Beijing for the first time since May, are fuelling the unease among investors. China’s capital cautioned that it was facing its most severe test of the pandemic, on the account of Covid flare ups triggering a slew of curbs.

“China’s Covid situation is really in the front row for Asia trading,” said Redmond Wong, market strategist for Greater China at Saxo Markets in Hong Kong.

Japan’s inflation soared to 40-year high

Despite the Bank of Japan’s (BOJ) best efforts to contain nationwide inflation, prices are certainly rising. Core consumer prices in Japan’s capital increased at their fastest annual pace in 40 years this month and surpassed the central bank’s 2% target for a sixth straight month, resulting in broadening inflationary pressure.

Tokyo’s core consumer price index (CPI) was 3.6% higher in November than a year ago, which exceeded a median market forecast of 3.5%. It’s also worth mentioning that the last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2% higher than a year earlier. “Price hikes are broadening and suggest the weak yen could keep inflation elevated well into next year,” said Mari Iwashita, chief market economist at Daiwa Securities.

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