While the storm clouds of inflation and the war in Ukraine loomed over markets during the summer, the outlook, ironically, brightened in the autumn and winter as chinks of light began to shine on the global economy. Signs that inflation may have peaked in major economies allowed investors to believe that the end of the interest-rate-hiking cycle could be in sight in 2023.

And while central bankers around the world continued to increase interest rates at a pace and scale not seen for decades, investors’ new-found hope was encouraged by the Federal Reserve, which adopted a less hawkish stance in terms of language. Officials indicated that they were considering whether to reduce the pace of monetary tightening as the economy slows.

Moreover, in December the central bank backed this view by raising the overnight borrowing rate by just 0.5%, taking it to a range of between 4.25% and 4.5%, following four straight 0.75% moves. December’s move meant that interest rates are now at their highest level in 15 years.

Official data certainly supported optimism that inflationary pressures are easing in many markets as supply chains – gridlocked by pandemic lockdowns and further disrupted by the Ukraine war – gradually loosen up.

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