Today on the program, we welcome back Fidelity’s Investment Director Tom Stevenson as discusses the impacts of rate hikes, inflation, and housing on different economies around the world. Tom comments on the effects of rates hikes on GDP and if that could in fact lead to an inflation lead recession. He explains how this is a big puzzle firstly for central banks and it is what the Fed has been grappling with for so long. They just don’t know what the cumulative impact will be after all these rate hikes. In the UK, Tom says you are starting to see in the housing market for example, and other areas of the economy as well, a real slowing down in the economy, which could indicate that the wind is catching up with all those interest rate hikes. The danger he says is that you keep hiking, and it just becomes counterproductive, and you unnecessarily push the economy into a recession. But now, it looks like the markets have regained their poise and have bounced back really quite nicely, placing itself in this type of Goldilocks economy of “not too hot not too cold.” Tom also discusses China’s slower than expected growth, Japan’s unexpected economic climb, and how that all could affect global economies. He also touches on the UK job market and the state of consumer confidence. He says we are seeing quite a strong wage growth in the UK, which is one the key drivers of inflation. He adds that going to be make it harder to squeeze inflation out and the interest rates are going to have to stay higher as a result.

Recorded September 6, 2023.

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