Countdown to U.S. recession begins

[Major investment banks predict that the US economy will fall into recession in 2023]

More than two-thirds of economists at the 23 large financial institutions that have direct business dealings with the Fed believe the U.S. economy will enter a recession in 2023. Two others predicted a recession in 2024. They listed some red flags, such as Americans are reducing their savings during the epidemic, the housing market is declining, and banks are tightening lending standards. Most economists expect the rate hike to push the unemployment rate above 5 percent from 3.7 percent in November, still low by historical standards but potentially throwing millions of Americans out of work. The U.S. economy is expected to shrink in 2023, although it performed relatively well during the 2022 rate hike, and the cooling effect of the rate hike will be more pronounced in 2023. The Fed may raise interest rates in the first quarter of this year, suspend rate hikes in the second quarter, and begin to cut interest rates in the third or fourth quarter.

[The Federal Reserve's terminal interest rate will reach a range of 5.25-5.50% at the May meeting]

Markets expect the minutes of the Fed's December policy meeting to shed more light on its policy outlook for 2023. It should be noted that although the Fed slowed the pace of interest rate hikes to 50 basis points at its December meeting, the committee said it expects a substantial increase in terminal rates in 2023. TD Securities sees terminal rates in the 5.25-5.50% range at the May FOMC meeting. U.S. job creation likely picked up momentum in December, with payrolls rising at the end of last year, the latest sign that U.S. labor market conditions remain tight.

[The dollar has pared its gains]

The dollar has pared gains as investors look for signs that the Fed's rate hike cycle may be over. The Fed has raised interest rates by a cumulative 425 basis points since March in an attempt to rein in rising inflation. Everyone is debating whether the big problem in 2023 is anemic growth or stubborn inflation, and if it is anemic growth, the dollar will fall. If it is high inflation, then the dollar will rebound. The dollar was on track for a 7.9 percent annual gain against a basket of currencies, its biggest in seven years.

[UK to allocate £75m to boost nuclear fuel production]

The United Kingdom announced that it will allocate 75 million pounds to increase nuclear fuel production. Energy and Climate Minister Graham Stuart said in a statement that domestic investment in new fuel production methods is encouraged, with the aim of diversifying uranium and nuclear fuel production so that the UK can wean itself off Russia. The UK has awarded up to £13m in funding for the scheme, which is strategically important to produce fuel for the UK's Advanced Gas-cooled Reactor.

[Eurozone manufacturing PMI slows for second consecutive month in December]

Eurozone December manufacturing PMI final: The pace of decline in factory output slowed for a second straight month, giving the struggling manufacturing sector some encouragement as it kicked off the new year. Optimists for the year ahead outnumbered pessimists for the first time since last August, suggesting a steady improvement in business confidence. The outlook has brightened as supply chains show signs of healing thanks to government aid measures, inflationary pressures have eased markedly and concerns over an energy crisis in the euro zone have eased. As a result, supply chain and inflation headwinds for companies have eased from the heightened vigilance of last fall.

[EU plans to overhaul the energy market to reduce the cost of renewable energy]

The European Union plans to overhaul energy markets to reduce the cost of renewable energy. EU Energy Commissioner Simson said the European Commission faced ""very strong political pressure"" to reform markets to lower consumer spending as the bloc grapples with its most challenging energy crisis in decades. In the draft document, the European Commission proposes steps to make renewable energy more reflective of its ""true cost of production"", since energy produced by wind farms or solar panels is essentially free once the infrastructure is in place. It also proposes an extension of the windfall profits tax on renewable energy companies, which expires in 2023, with those benefits being passed on to consumers.