Hikes Everywhere

Weekly Briefs
06 Feb 2023
7 min read
Hikes Everywhere

Last week was certainly a busy one – especially when it came to interest rate decisions, with the British and European central banks hiking rates by 50 basis points each and the Fed increasing its benchmark rate by 25 basis points. Also out last week were several pieces of good news for Europe, with the bloc’s economy defying expectations of a contraction last quarter while inflation cooled more than expected in January. And in further good news, the International Monetary Fund raised its global growth outlook for the first time in a year. Elsewhere, Big Tech favorites Apple, Amazon, and Alphabet all reported disappointing results last week. Finally, in its latest outlook, BP trimmed its forecasts for fossil fuel demand while boosting its estimates for nuclear and renewables through to 2035. Find out more in this week’s review.


New data last week showed that the eurozone economy grew in the final quarter of 2022 despite economist predictions of a downturn, boosting hopes that the region will avoid a recession. The bloc’s GDP edged up by 0.1% in the final quarter from the previous one, defying economist estimates for a contraction of 0.1%. Helping matters was milder weather and government support that cushioned the impact of soaring energy prices triggered by Russia’s invasion of Ukraine. On a country-by-country basis, German and Italian economic output shrank last quarter while France and Spain saw expansions. Let’s hope the party lasts: economists are again predicting that GDP will contract this quarter, and time will tell if the eurozone economy can prove to be resilient once more.

The eurozone economy unexpectedly grew in Q4 2022. Source: Bloomberg

Sticking to Europe, the region got more good news last week, with new data showing inflation in the bloc slowed more than expected on the back of lower energy prices. Consumer prices in the eurozone were 8.5% higher in January from a year ago – a marked slowdown from December’s 9.2% inflation rate and below economist estimates of 8.9%. On a month-on-month basis, consumer prices dropped by a more-than-expected 0.4%. And while annual core inflation – which strips out volatile items like food and energy – remained at a record high of 5.2%, it was a better outcome than expected (economists had predicted that the number would accelerate to 5.4%).

Eurozone inflation slowed down for the third month in a row, but the core measure remains at a record high. Source: Bloomberg

In other economic news, the International Monetary Fund (IMF) raised its global growth outlook for the first time in a year on the back of resilient US consumer spending and China’s reopening. In its latest World Economic Outlook last week, the IMF said global GDP will expand by 2.9% in 2023 – 0.2 percentage points more than it forecast back in October. While that’s a slowdown from the 3.4% expansion recorded in 2022, the institution said it expects growth will bottom out this year before accelerating to 3.1% in 2024.

The IMF raised its world growth forecast for 2023. Source: Bloomberg

On the inflation front, the IMF sees world consumer-price increases slowing to 6.6% this year, 0.1 percentage point higher than its October projection, following 8.8% in 2022. It forecast further slowing to 4.3% in 2024. While inflation rates are expected to be lower in about 84% of countries in 2023 than in 2022, the institution made it clear that the fight has not been won yet and that monetary policy will need to remain contractionary in most parts of the world.

Central Bank Decisions

Yes, this deserves its own section this time because last week was a mammoth one in terms of central bank decisions.

The Fed increased its benchmark rate by 25 basis points on Wednesday in a widely expected move that took its target rate to a range of 4.5% to 4.75% (the highest level since September 2007). The smaller move comes after a half-percentage-point increase in December and four jumbo-sized 75 basis-point hikes before that. Fed chair Jerome Powell said policymakers expect to deliver a couple more rate hikes before putting their aggressive tightening campaign on hold. That comes after the central bank acknowledged that inflation “has eased somewhat but remains elevated” (compared to previous language where officials simply stated that inflation was “elevated”).

The Fed hiked interest rates by 25 basis points, taking them to their highest level since September 2007. Source: Federal Reserve, AFP

A day later, the European Central Bank (ECB) and Bank of England (BoE) both increased their interest rates by 50 basis points each. The ECB, as expected, raised its deposit rate to 2.5% – the highest since 2008. Policymakers warned that the most aggressive bout of monetary tightening in the ECB’s history isn’t done, even as energy prices plunge and the Fed moderates the pace of its own hikes. In a statement, the ECB said that it intends to raise rates by another 50 basis points at its March meeting, then “evaluate the subsequent path of its monetary policy”. But at least ECB president Christine Lagarde acknowledged that risks to the growth and inflation outlooks have become more balanced than before, adding that the economy is more resilient than expected.

The ECB hiked interest rates again and signaled more to come. Source: Reuters

The BoE’s 50-basis-point rate hike, which was widely expected, took its interest rates to a 15-year high of 4%. The central bank’s inflation forecast shows price rises will ease quickly from December’s 10.5% annual rate to a level under 4% by the end of the year, and then drop to well below the 2% target in 2024. What’s more, the BoE is now anticipating a milder recession this year than previously thought, estimating a 0.5% drop in GDP in 2023. But despite the gloomy outlook, the BoE appeared to endorse the market view that rates will peak at around 4.5% in the coming months.

The BoE is now forecasting a shorter, shallower recession than it did back in November. Source: Bloomberg


Apple, Amazon and Alphabet – technology bellwethers with a combined market value of almost $5 trillion – posted results last Thursday that showed an economic slowdown is choking demand for electronics, ecommerce, cloud computing, and digital advertising – backbones of the global tech economy. 

Apple’s revenue fell by a worse-than expected 5.5% during the holiday quarter – the firm’s first quarterly decline since 2019 and the first time it missed analysts’ holiday sales projections since 2015. iPhone sales (Apple’s biggest source of revenue) stumbled 8% last quarter from the same time last year.

Alphabet missed analysts’ estimates on both revenue and earnings, signaling lower demand for its search advertising during an economic slowdown. Fourth-quarter revenue grew by just 1% from the year before – the slowest increase since Q2 2020 (when digital ad spending slumped due to the pandemic). What’s more, Alphabet is feeling the heat from Microsoft-backed ChatGPT, and promised new AI features are coming to Google search “very soon” in response.

And while Amazon’s fourth-quarter revenue growth of 9% beat analysts’ estimates, the firm reported that consumer demand remains soft and sales in its lucrative cloud-computing division will continue to slow throughout the year.

Amazon, Apple, and Alphabet have seen sales decelerate in the past year. Source: Bloomberg


In BP’s latest outlook (one of the energy sector’s most closely read studies), the oil and gas major trimmed its 2035 forecasts for fossil fuel demand while boosting its estimates for nuclear and renewables.

BP decreased its forecasts for oil, gas, and coal demand while increasing its estimates for nuclear and renewables. Source: Bloomberg, BP Energy Outlook 2023

Digging into the study in a little more detail, it describes three potential scenarios for the evolution of the energy sector over the next few decades. Under its most conservative “New Momentum” scenario, which is designed to “reflect the current broad trajectory” of the world’s energy system, oil demand would be about 93 million barrels a day in 2035 – 5.5% lower than its forecast last year – and natural gas demand would be 6.4% weaker. Nuclear and renewables demand, meanwhile, are forecast to be 2.1% and 5.3% higher than previously estimated respectively.

BP sees oil demand falling in the coming years, with the speed of the decline depending on climate action. Source: Bloomberg, BP Energy Outlook 2023

There are several factors behind BP’s updated outlook. First, Russia’s war in Ukraine and the resulting disruption to oil and gas supplies have pushed countries to pursue greater energy security over the next decade by investing in domestic renewable and nuclear power. Second, the higher food and energy prices associated with the conflict have contributed to a sharp slowdown in global economic growth, leading to lower overall energy demand. In fact, BP reduced its 2025 forecast for global GDP by 3% from its previous outlook due to the war. Third, the multibillion-dollar US support package for clean energy is expected to further accelerate the shift to renewables in the world’s biggest economy.

This week

  • Monday: Eurozone retail sales (December). Earnings: Activision Blizzard, Pinterest.
  • Tuesday: German industrial production (December). Earnings: Gilead Science.
  • Wednesday: Chinese loan growth (January). Earnings: Disney, Uber.
  • Thursday: US weekly initial jobless claims. Earnings: PepsiCo, PayPal, Philip Morris International.
  • Friday: Chinese inflation (January), UK GDP (Q4).
General Disclaimer
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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