High inflation? It’s a global story too: Morning Brief
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Wednesday, April 20, 2022
Today’s newsletter is by Brian Cheung, an anchor and reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
Americans are not the only ones feeling the pain of high inflation. It’s bogging down almost every other nation as well.
A fresh round of economic forecasts from the International Monetary Fund (IMF) on Tuesday lowered global growth prospects, in part because of rising price pressures. Making matters worse: the Russian invasion of Ukraine.
“Inflation is a clear and present danger for many economies,” IMF Chief Economist Pierre-Olivier Gourinchas told Yahoo Finance Tuesday. In January, the IMF projected global growth of 4.4% in 2022. Yesterday’s update downgraded that forecast to 3.6%.
Globally, the IMF predicts that prices in “advanced economies” (like the U.S.) will rise by 5.7% this year. In emerging market and developing economies, inflation is projected to clock in at 8.7% this year.
Those figures make it clear that inflation is not a phenomenon exclusive to the U.S., where Consumer Price Index readings from March showed prices rising by 8.5% year-over-year.
The IMF warns that these pressures will “remain elevated for longer” than it had originally expected earlier in the year, due to the disruption to energy and metal exports from Russia and wheat exports from Ukraine. A zero-COVID policy in China could scramble supply chains out of Asia as infections rise.
All of this means that central banks like the Federal Reserve will have to deliver the medicine of higher borrowing costs to tamp down on inflation. In the U.S., Fed Chairman Jerome Powell is on the warpath against higher interest rates, with all signs pointing to a king-sized interest rate increase of 0.50% next month (not done since 2000).
The Bank of England is a few steps ahead of the Fed on tightening, and the European Central Bank appears poised to follow soon.
The problem: the cure could be worse than the disease. Pull the crisis-era stimulus too fast, and the central banks could tip the economy into recession (see: yield curve inversion).
“This is certainly a serious downside risk,” Gourinchas said Tuesday, adding that central banks need to be careful as they walk that “fine line.”
Either way, the outcome is going to be the same.
Raise rates and lower inflation? Higher borrowing costs lowers consumption… and leads to slower growth.
Move too slow and inflation runs rampant? High prices erase wage gains and lowers consumption… and leads to slower growth.
What to watch today
Economy
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7:00 a.m. ET: MBA Mortgage Applications, week ended April 15 (-1.3% during prior week)
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8:30 a.m. ET: Existing home sales, March (5.78 million expected, 6.02 million in February)
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2:00 p.m. ET: Federal Reserve releases Beige Book
Earnings
Pre-market
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6:00 a.m. ET: Anthem (ANTM) is expected to report adjusted earnings of $7.73 per share on revenue of $37.47 billion
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7:00 a.m. ET: Nasdaq (NDAQ) is expected to report adjusted earnings of $1.95 per share on revenue of $892.00 million
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7:00 a.m. ET: Baker Hughes (BKR) is expected to report adjusted earnings of 19 cents per share on revenue of $5.00 billion
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7:00 a.m. ET: Procter & Gamble (PG) is expected to report adjusted earnings of $1.29 per share on revenue of $17.73 billion
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7:30 a.m. ET: Abbott Laboratories (ABT) is expected to report adjusted earnings of $1.47 per share on revenue of $11.00 billion
Post-market
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4:00 p.m. ET: CSX Corp. (CSX) is expected to report adjusted earnings of 37 cents per share on revenue of $3.31 billion
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4:05 p.m. ET: Kinder Morgan (KMI) is expected to report adjusted earnings of 28 cents per share on revenue of $3.72 billion
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4:10 p.m. ET: Alcoa Corp. (AA) is expected to report adjusted earnings of $2.84 per share on revenue of $3.44 billion
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4:10 p.m. ET: Tenet Healthcare (THC) is expected to report adjusted earnings of $1.03 per share on revenue of $4.70 billion
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4:15 p.m. ET: Crown Castle International (CCI) is expected to report adjusted earnings of $1.87 per share on revenue of $403.60 million
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4:30 p.m. ET: United Airlines (UAL) is expected to report adjusted losses of $4.23 per share on revenue of $7.67 billion
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4:30 p.m. ET: Steel Dynamics (STLD) is expected to report adjusted earnings of $5.66 per share on revenue of $5.32 billion
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4:40 p.m. ET: Equifax (EFX) is expected to report adjusted earnings of $2.14 per share on revenue of $1.33 billion
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After market close: Tesla (TSLA) is expected to report adjusted earnings of $2.27 per share on revenue of $17.92 billion
Yahoo Finance Highlights
Global economy to ‘slow significantly’ following Russian invasion of Ukraine: IMF
One big challenge facing Tesla that has nothing to do with Elon Musk’s Twitter bid
Biden administration to erase student debt of more than 40,000 borrowers
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