Morning Market Brief: August 22, 2023

China trims key interest rate?

Inflation isn’t the only issue challenging central banks. While more insight could be gained at the end of this week at Jackson Hole about the US Federal Reserve Board’s take on its battle against inflation, China is facing the prospect of an issue at the other end of the spectrum – deflation. Also, consumer confidence and spending in China has fallen in response to pressures on the property market and youth unemployment.?

• The People’s Bank of China lowered its key interest rate. The one-year loan prime rate was decreased from 3.55% to 3.45%. This rate typically influences outstanding and short-term loans.
• However, the five-year loan prime rate remained unchanged at 4.2%. Analysts were expecting a decline in the longer-term rate, which influences mortgage rates.
• Evergrande, the giant Chinese real estate property developer, filed for bankruptcy protection in the US last week. It defaulted on its debts in 2021. Based on the group’s website, it has over 13,000 property projects throughout China. Monetary policy management by policymakers in China was expected to address challenges in the real estate industry.
• Consumer price inflation in China decreased by 0.3% in July on an annual basis. Several investment banks have downgraded their economic growth forecasts for 2023 and 2024 in response to the property market slowdown and slowing global demand.?

Given these uncertainties, diversification across various asset classes and geographies remains a cornerstone of a resilient investment approach. By staying attuned to global economic shifts and considering a long-term perspective, you can position your portfolio to harness the potential rewards while navigating a fluctuating financial landscape.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.