DNB Markets analyst Magny Ostnor wrote on Monday that higher inflation, more central bank anxiety and higher interest rates were important reasons why the economy and financial markets are leaving a weak quarter behind.
Ostnor also believes that the fear of recession has taken hold over inflation and interest rates. He wrote that market participants increasingly believed that central banks would now prioritize lowering inflation and that this would not happen without a recession as a result.
On the basis of this, Ostnor wrote that interest rates have corrected sharply. In the US, two-year swap rates fell 70 basis points to 3.13 percent, and on Friday alone the drop was 15 basis points. This now means that the Fed will raise the key interest rate to 3.5 per cent during the year.
The main characters support the fear of stagnation
On Friday, it was announced that inflation in the euro zone rose by 0.5 percentage point to 8.6 percent in June. Although core inflation has fallen somewhat, Ostnor believes this is due to the collective and fuel support of the German authorities during the summer months. In the US, the ISM manufacturing index fell to its lowest level in two years.
Furthermore, he wrote, the Norwegian labor market continues to shoot up all cylinders, and unemployment remains low at 1.6 per cent. Unlike the industry in other countries, the forecast for Norwegian activity according to the PMI is increasing. DNB believes that demand is strong, and many companies have reported increased inventory levels as inventory against potential delivery issues.
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