US Debt Ceiling Talks Continue, Market Uncertainty Rises
The US debt ceiling negotiations continue in Washington, dominating financial news as the US Treasury Janet Yellen warned that the US economy hangs in the balance.
Japan’s National CPI and Australia’s unemployment rate are the two most important data releases expected for the rest of the week.
In the US, media reports suggested that lawmakers have made some progress regarding the debt ceiling while the White House announced that negotiations would continue during the G7 Summit in which the US president is expected to take part.
Bank of America economists noted in a report: “Should any X-date breach last a month or more and involve prioritization of debt payments it would mean immediately cutting spending by about 5% of GDP.” The report suggested that “this would turn an otherwise mild recession into a severe recession,” adding that the Federal Open Market Committee (FOMC) could be forced to cut interest rates during the third quarter of 2023.
IMF: Germany’s growth to remain muted
The International Monetary Fund's (IMF) report on Germany’s economy suggested that although strict policies and mild weather conditions have helped it a lot in the last 12 months, growth is forecast to remain muted. IMF officials warn that tighter financial conditions and energy prices could weigh on near-term economic growth.
The IMF said that the German GDP will likely remain unchanged in 2023 before its growth rate accelerates to 1% or 2% between 2024 and 2026.
Japan National CPI Inflation in April
The Japanese Statistics Bureau is expected to announce April’s National CPI inflation figures. Economists forecast CPI inflation to come in at 2.5%, 0.7% lower than March’s figure.
There are indications that inflation in Japan may have already peaked. Government subsidies and modest economic growth could help inflation gradually return to the Bank of Japan’s 2% target.
Australian Unemployment Rate Unchanged in April?
The Australian Bureau of Statistics (ABS) will release data regarding Australia’s unemployment rate in April, early on Thursday morning. Economists expect the rate to come in at 3.5%, unchanged from March. The unemployment rate remains near the lowest level recorded since the 1970s.
Economists at the IMF forecast the rate to rise up to 4% by the end of 2023 while the Reserve Bank of Australia (RBA) sees the rate at 3.75%.
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