Traders see inflation falling this year – JPMorgan survey

By Naomi Rovnick

LONDON (Reuters) – Most traders believe global inflation has peaked, while potential recession has emerged as the main risk to markets this year, according to a survey released on Wednesday.

JPMorgan’s annual survey of institutional and professional trading clients found that 44% of the 835 respondents predicted inflation will decrease in 2023. A further 37% forecast that price rises would level off.

Asked which factor would have the most impact on markets this year, the largest group of traders in the study, representing 30% of those surveyed, placed a global downturn as their top concern. This was up from just 5% of respondents to the same survey in 2022, when JPMorgan’s trading clients made the accurate bet that inflation would dominate the market mood for the remainder of last year.

“Inflation was the number one concern for the market for quite a while,” said Scott Wacker, head of FICC e-commerce sales at JPMorgan.

“The concern for most traders is with high interest rates in response to inflation,” he added, and whether central banks had “gone too far” in their efforts to cool price rises.

The U.S. Federal Reserve, which concludes its latest monetary policy meeting on Wednesday, is widely expected to raise benchmark borrowing costs by a quarter of a percentage point to a range of 4.5%-4.75%.

That would represent the Fed’s smallest hike in its 10-month tightening cycle so far, after inflation moderated, although money markets are also tipping the world’s most influential central bank to keep raising rates until the summer.

In the euro zone, the European Central Bank is forecast on Thursday to lift its main deposit rate by 50 basis points to 2.5%, even after data this week showed the German economy unexpectedly shrank at the end of last year.

The majority of JPMorgan’s survey respondents in Europe, where price rises are running at around 9%, believed inflation rates would decrease.

Traders in the U.S., where headline consumer prices rose at a rate of to 6.5% in the year to December, mostly thought inflation would plateau from here, the survey showed.

(Reporting by Naomi Rovnick; Editing by Sharon Singleton)