Central banks take final 2022 crack at taming inflation

<p>Kia ora,</p><p>Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news this week brings the final chance by central banks to tackle inflation.</p><p>In the upcoming week, some influential data and policy positions will be released. First we will get the REINZ housing transaction data for November tomorrow and it is widely expected to be weak. Next we will get Chinese new yuan loans data on Wednesday which is expected to swell as Beijing pushes its state-owned banks to shore up struggling property developers. Then the US will release its November CPI data which is expected to show inflation easing somewhat. And that will be followed by the US Fed who will raise its policy interest rate, probably by +50 bps. But their commentary will be hugely influential. Bond markets have already priced in a more dovish stance.</p><p>That will be preceded by the New Zealand current account position (which should be important, but it is unlikely to move markets), then the NZ Q3 GDP which might show a +5.5% growth rate off a low base, and followed by Australian labour market data for November.</p><p>We will end the week with US retail sales data and an ECB rate review, expected to bring a +50 bps rise to 2.5%. That ECB rate hike will be the last official central bank effort to tackle inflation in 2022. 2023 will start with the Bank of Japan's first review on January 18 who will kickstart a year of tough choices for central bankers.</p><p>However, investors are now favouring funds that would benefit from slowing inflation and falling rates, in a sign that markets think <a href="https://www.wsj.com/articles/investors-grow-more-confident-fed-will-pull-off-a-soft-landing-11670704543?mod=hp_lead_pos2" target="_blank"><strong>a soft landing is now the more likely</strong></a> outcome in 2023.</p><p>Over the weekend, China said its <a href="http://www.stats.gov.cn/tj