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In the Know – November 29, 2022


Overseas news

The monthly gain of the S&P 500 shrank as the Federal Reserve (the Fed) Bank of St. Louis President James Bullard said markets may be underestimating the chances of higher rates.


Meanwhile, his New York counterpart John Williams noted policymakers have more work to do to curb inflation. Fed Vice Chair Lael Brainard said the string of supply shocks is keeping inflation risks elevated.


Central banks such as the Fed use increases in the key rate to manage inflation. If they feel that inflation is still growing at a too-rapid pace, they may continue hiking rates.


West Texas Intermediate (WTI) rose by 1.3% to settle above $77 per barrel as OPEC+ delegates said deeper production cuts could be an option when they meet this weekend.


Earlier, oil prices slumped below $74, the lowest since December. This happened as protests over harsh anti-COVID measures erupted across China, triggering a broad selloff in commodities and equity markets.


Limiting the supply of oil via lower output means that the same number of buyers will be competing for less stock. This would lead to higher prices of the fuel.


The China protests have impacted the country’s overall manufacturing output. This, in turn, causes supply chain disruptions in many countries, as China factories produce goods for customers worldwide.


Local developments

S&P Global Ratings revised its Philippine economic growth forecast to 7.1% this year from the 6.3% estimate it gave last September. However, it sees growth at just 5.2% in 2023, due to the impact of higher interest rates and elevated inflation.


While the increasing cost of borrowing money and high inflation have immediate effects on the economy, they may also trigger negative consequences over time.


Data from the Philippine Statistics Authority (PSA) showed the general wholesale price index (GWPI) jumped 8.2% year-on-year. This was caused by higher costs for chemicals, including animal and vegetable oils and fats.


General Wholesale Price refers to the price of a commodity bought in bulk for further resale or processing by wholesalers, distributors, and marketing agents, minus all discounts, allowances, and rebates.


The GWPI looks at the prices of commodities which represent goods that are usually traded in the wholesale market. When this index rises, it may signal that higher retail prices are coming.


With little positivity in the latest news, this might not be the time for big investing decisions. Instead, you can stick to your strategy if it’s still proving to be effective while waiting for the situation to improve.

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