The U.S. is scheduled to release its economic growth data for the second quarter of 2022 later today, which is the key highlight for this week after the Federal Reserve meeting yesterday.
The market consensus expects the U.S. economy to grow 0.5% in 2Q22, better than a contraction of 1.6% in the first quarter. Nevertheless, some economists even forecast a contraction as low as 1.6% QoQ. On the other hand, the highest expected economic growth in 2Q22 is 2%.
Yesterday, the Federal Reserve had raised its key policy rate by 75 basis points to a range of 2.25% to 2.5% from 1.5% to 1.75% previously.
In the press conference, the Fed’s Chairman Jerome Powell said that the Fed anticipated that ongoing increases in the target range will be appropriate to curb elevated 40-year high inflation of over 9.1% to its long-run target of 2%.
The chairman also supported the idea of an interest rate hike at an unusually large figure in September, though added that a slower pace of hikes could be required to allow the central bank time to assess the impact of tighter policy measures on the economy and inflation.
The U.S. President Joe Biden still believes that the economy is at the strongest it has ever been despite approval ratings having reached a new low amid inflation and rising food and gas prices.
The number of Americans filing for unemployment benefits for the week ending July 16 rose by 7,000 to 251,000, up from the previous week’s 244,000, the Labor Department reported Thursday. The figure was the highest since mid-November last year.
The U.S. inflation accelerated at a faster-than-expected rate in June 2022, hitting 9.1% YoY and beating the estimate of 8.8% rise.
In the meantime, core inflation, which excludes food and energy prices, dropped to 5.9% YoY in June, but still higher than expectations of 5.7%.
As inflation is running high, economists expect the central bank to be more hawkish on the rate hike to slow down surging consumer prices, but could hurt the economy that is recovering from the Covid-19 outbreak.
Maybank Securities (Thailand) (MST) wrote that if the U.S. gross domestic product shows slower growth than the previous quarter, it will signal a technical recession, which may be a slightly more disturbing factor to the stock market. However, MST believed that with the market correction, it is a good opportunity to gradually accumulate good stocks.