It’s anyone’s guess where the global economy is headed. This has been the case for some time, and is especially true these days, given the strange state of affairs in the US and new faces at the top in China. The Federal Reserve’s mission to tamp down inflation is ever more likely to mean a higher peak interest rate than investors had been expecting just weeks ago, thanks in part to a labor market that continues to defy expectations. On the continent, the European Central Bank has signaled a similar situation when it comes to rising rates. Central bankers appear worried about a cycle in which workers seek higher pay to offset inflation’s bite, and in turn trigger more price increases. In Washington, the Fed’s monetary policy has detractors, too, including Democratic Senator Elizabeth Warren, who warned rate hikes could “tip this whole economy off an economic cliff” and push millions out of work.
In China, government officials say the economy there is showing signs of a stronger than expected rebound following an abrupt end to “Covid zero,” and that manufacturing posted its biggest improvement in more than a decade. With Beijing’s leaders gathering at their annual legislative session amid a reshuffle of economic policymakers, observers on Wall Street and in Washington are wondering whether Xi Jinping’s new guard will accelerate intervention in the economy—and confrontation with the West.
