By Naomi Rovnik
LONDON (Reuters) – Most traders believe global inflation has peaked, with a lower recession this year being the main risk for markets, according to a survey released on Wednesday.
JPMorgan’s annual survey of institutional and professional business clients found that 44 percent of 835 respondents predicted inflation would decline by 2023.
When asked which factor will have the biggest impact on the market this year, the largest group of traders in the survey, representing 30 percent of those surveyed, ranked the global recession as the top threat. This is the year Only 5% of respondents to a similar survey in 2022 made the correct bet that inflation would dominate market sentiment in 2022.
“Inflation has been a major concern for the market for some time,” said Scott Wacker, head of FICC e-commerce sales at JPMorgan.
“The concern of most traders is high interest rates in relation to inflation,” he added, adding that central banks “have gone too far” in their efforts to slow inflation.
The US Federal Reserve, which concluded its latest monetary policy meeting on Wednesday, is expected to raise benchmark borrowing costs by a quarter point to 4.5%-4.75%.
After adjusting for inflation, it represents the Fed’s smallest hike so far in its 10-month tightening cycle, although financial markets are bracing for the world’s most influential central bank to keep raising rates through the winter.
In the euro zone, the European Central Bank is forecast to raise the key deposit rate by 50 basis points to 2.5% on Thursday, even after data this week showed the German economy unexpectedly contracted at the end of last year.
Most respondents to a JPMorgan survey in Europe, where inflation is hovering around 9%, believed inflation would slow.
Traders in the United States, where prices rose 6.5 percent in the year to December, mostly think inflation has taken off, the survey found.
(Reporting by Naomi Rovnik; Editing by Sharon Singleton)