Inflationary pressures appear to be easing across many parts of the world, with key indicators showing either stable or declining trends. This slowdown in inflation offers some relief, yet the persistence of elevated services inflation complicates the outlook for central banks, which are grappling with how best to normalize monetary policy without derailing growth.

In the United States, a slight uptick in unemployment to 4.3% suggests a cooling labor market, potentially marking a shift in the economic cycle. This development, highlighted by the activation of the “Sahm Rule“, contrasts with the Eurozone, where unemployment rates remain stable but economic sentiment has taken a downturn.

Given this momentum, the global economy appears poised for a relatively soft landing, buoyed by the unexpectedly strong performance of the US economy. The US continues to outperform expectations, but the outlook remains cautious as higher interest rates, and a softening labor market are expected to dampen consumer spending in the coming months.

In response to these developments, the Federal Reserve has indicated that its tightening program is nearing its conclusion, although the timing and extent of future rate adjustments remain uncertain. The importance of coordinated central bank actions is underscored by the recent surprise interest rate hike from the Bank of Japan, which has introduced new complexities, particularly concerning the “yen carry trade”.

We hope you find this month’s edition insightful and wish you a pleasant read.