Federal Reserve (Fed) minutes from its last meeting suggested interest rates were likely to rise further in 2023 although at a slower pace. After 10 consecutive increases, June witnessed a pause in tightening. In the Eurozone, service and manufacturing output weakened while its strongest economy, Germany, entered recession. China continued to send mixed messages but doubts remain over its banking system and the strength of its post-pandemic recovery. The UK remains out of recession although for how long? If Mr Bailey and his Monetary Policy Committee chums really are serious about slaying inflation with rate rises (something they originally were very reluctant to do), economic contraction won’t be far away.
It’s not a rosy economic picture. All major central banks are attempting to solve an inflation puzzle they are largely responsible for yet were unable to foresee. Their credibility, now in shreds, means they are now almost certain to create a global recession. The only antidote, to our eyes, are businesses of stature in possession of pricing power.
