December Wrap Up

Here’s what you need to know about what went down this month:

Fed: Another 0.5% hike and more to come

The Federal Reserve has, yet again, approved an interest-rate increase for the seventh time this year and there are signals indicating more hikes to come. However, this 0.5 percentage point hike marked a step down after observing four consecutive larger increases of 0.75 point previously. The central bank raised its benchmark rate a half-point to a range of 4.25 per cent to 4.5 per cent, which is the highest level in 15 years. “The inflation data in October and November show a welcome reduction,” Powell said at his news conference. “But it will take substantially more evidence to give confidence that inflation is on a sustained downward path.” A majority of Fed officials forecasted that fed-funds rate will rise to peak level between 5% and 5.5% in 2023.

Hong Kong launches first crypto ETFs

On December 16, Hong Kong launched its first two exchange-traded-funds for virtual currencies, following through on a commitment made in October to become a massive worldwide digital asset center, rivalling Singapore. The Financial Services and Treasury Bureau published a policy document on October 31, 2022, to encourage the long-term growth of digital currencies and crypto networks (NFTs) in Hong Kong. After raising close to $79million in initial investment, the ETFs made slight gains on their debut. CSOP Asset Management’s bitcoin and ether futures ETFs garnered $58.9 million and $19.7 million, respectively, ahead of their listings, the Hong Kong-based group said in a statement. Hong Kong’s move to launch crypto ETFs and make it easier for retail investors to trade digital assets comes after years of stricter regulations than that of Singapore, despite the latter showing intentions to toughen against unethical behaviour in the sector.

Recession clouds ahead in New Zealand

As New Zealand’s third quarter economic growth showed that the country’s economy continues to hold up well where the GDP gained 2.0%, signs of an impending slowdown caused by high interest rates and falling housing prices are starting to appear. The economic growth was largely due to the big surge in tourism, construction and transport. New Zealand’s central bank has undertaken an aggressive tightening cycle with rates now 400 basis points higher than in October 2021 as it tries to combat inflation that is currently just below three-decade highs. Both the country’s central bank and Treasury have forecasted the country to enter into a shallow recession in the second quarter of 2023.

Russia threatens to slash oil supplies in 2023

Speaking to state television on December 23rd, Russia’s Deputy Prime Minister Alexander Novak stated that Russia may cut oil output up to 7% in early 2023 and halt sales to countries supporting the price cap that was introduced earlier in December. The European Union, G7 countries and Australia introduced a $60 per barrel price ceiling on Russian oil from December 5 on top of the ban by the EU on Russian seaborne oil. These measures were carried out to weaken Russia’s ability to finance the war while making sure the much-needed energy exports do not come to a standstill.

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