Vi e w p o i n t | 23 Jan 2026 09:40:48 ET │ 16 pages Global Economics Global Inflation Monitor: Price Pressures Should Remain Subdued CITI'S TAKE Global headline inflation over the past year has stabilized near 2%, while core has run a bit warmer, at around 2½%, as services inflation has declined only gradually. US inflation meanwhile has diverged from the rest of world as tariff-related price pressures pushed up core goods inflation by roughly 1½ percentage points last year. Core goods inflation outside t ...

Central Bank Independence - The Trump administration's actions are seen as a threat to the long-held consensus of central bank independence, which has been a cornerstone in developed economies for nearly 50 years [1][3] - Central bank independence is emphasized as crucial for financial and price stability, with warnings of potential structural rises in global inflation if the Federal Reserve's credibility is compromised [5][6] Political Pressure on the Federal Reserve - Fed chair Jerome Powell disclosed a criminal investigation into the $2.5 billion renovation of the Fed's headquarters, which he claims is a political attack due to the Fed's refusal to lower interest rates as pressured by Trump [2] - Global central bank leaders, including those from the Bank of England and the European Central Bank, have publicly defended Powell against these political pressures [2] Economic Vulnerability - Trichet highlighted a bipartisan consensus in the U.S. to increase spending, which contributes to economic and political vulnerability, as investors become cautious about financing deficits and high debt-to-GDP ratios [6] - The current level of debt as a proportion of GDP is reportedly higher than before the Lehman Brothers collapse, indicating significant economic vulnerability [7] Global Economic Implications - The potential subservience of the Federal Reserve to the executive branch could have damaging effects on global economic stability, with Trichet expressing concerns about the overall vulnerability of the global economy [8] - Citi warns that risks to central bank independence from populist governments could extend beyond the U.S., affecting global financial markets and policy decisions [10][11]

Core Viewpoint - Bitcoin's price is at risk of dropping to as low as $50,000 due to the upcoming Federal Reserve meeting and current market conditions [1][4]. Group 1: Federal Reserve Impact - The Federal Reserve is expected to announce interest rate decisions on December 10, which could influence liquidity in the markets and affect riskier assets like cryptocurrencies [1]. - A potential interest rate cut could provide liquidity, but market signals indicate Bitcoin may still face downward pressure even if rates are cut [2]. Group 2: Market Sentiment and Price Levels - Current market sentiment is characterized by extreme fear, suggesting a potential for deeper corrective action in Bitcoin's price [2]. - Key price levels identified include $82,000 and $78,000, which could act as demand magnets; however, if these levels do not attract buying interest, a decline into the low $70,000s is possible [4]. - A brief dip below $50,000 cannot be ruled out in a thin liquidity environment [4]. Group 3: Options Market and Future Outlook - Bitcoin options data shows that traders are not overly bearish, with significant put positions at $85,000 for options expiring on December 26 [5]. - Experts indicate that Bitcoin's structural uptrend is broken, and a firm hold above $100,000 is necessary to avoid further declines [6]. - Bloomberg Intelligence strategist Mike McGlone predicts Bitcoin could trade below $84,000 by the end of 2025, indicating potential price challenges ahead [7].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on global economic indicators, particularly the performance of the services and manufacturing sectors, highlighting the challenges posed by high tariffs on global manufacturing [1][3][5]. Core Insights - **Global Services Sector Resilience**: The global services PMI (Purchasing Managers Index) increased significantly in July, surpassing its average over the past few years, indicating strong performance in this sector [1][3]. - **Manufacturing Sector Struggles**: In contrast, the manufacturing sector has faced difficulties, with nearly 80% of country-level readings indicating contraction. The global manufacturing PMI stood at 49.9, suggesting a decline [1][4][6]. - **US Import Trends**: US imports decreased in Q2 as the frontloading from Q1 began to reverse, reflecting a potential slowdown in demand [1][3]. - **Inflation Trends**: Global inflation remains contained, with US "hard" inflation data showing only moderate signs of tariff-related pressures. However, there are indications that more price hikes related to tariffs may be forthcoming [1][3][5]. - **Global Growth Outlook**: Below-trend global growth and low oil prices are expected to keep inflation outside the US contained [1][3]. Additional Important Details - **PMI Data**: The global composite PMI for July was reported at 51.6, indicating expansion, while the manufacturing PMI was at 50.1, suggesting stagnation. The services PMI was higher at 53.0, reflecting growth [6][10][12]. - **Country-Level PMI Insights**: The report provides detailed PMI readings for various countries, with notable figures such as the US at 55.1, indicating expansion, while countries like China and India showed strong service sector performance with PMIs of 60.5 and 61.1, respectively [9][14][40]. - **Future Expectations**: The report suggests that the global economic landscape is influenced by ongoing tariff issues, which may lead to further adjustments in pricing and demand dynamics in the coming months [1][3][5]. This summary encapsulates the key points from the conference call, focusing on the performance of the global services and manufacturing sectors, inflation trends, and the implications for future economic conditions.

Summary of Key Points from the Conference Call Industry Overview - **Global Inflation Trends**: Global headline inflation in May remained stable at 2%, marking four consecutive months at historically normal levels. Core inflation slightly decreased to 2.4%, still above pre-pandemic levels, primarily due to elevated services inflation [1][5][6]. Core Insights - **US Inflation Expectations**: Limited tariff-related increases have been observed in US inflation, but survey evidence indicates that inflationary pressures are expected to rise as tariff impacts materialize. The expectation is for US inflation to increase due to these pressures [1][5]. - **Global Economic Conditions**: Below-trend growth and low oil prices, despite geopolitical challenges, are anticipated to keep inflation in regions outside the US contained [1][5]. - **Expansion of Inflation Monitor**: The latest global inflation monitor has been expanded to include US import prices, providing a broader view of inflation dynamics [1][5]. Important Data Points - **Core Inflation Rates**: The core inflation rate for developed markets (DM) is at 2.4%, while emerging markets (EM) excluding China show a core inflation rate of 2.6% [1][5]. - **PPI Trends**: The Producer Price Index (PPI) for global DM is at -0.8%, while EM stands at 1.7%, indicating differing inflationary pressures across regions [1][5]. - **Services Inflation**: Services inflation remains high at 4.7% for DM, with EM ex-China at 2.8% [1][5]. Additional Insights - **US Import Prices**: The report highlights US import inflation, which is currently at 0.2% overall and 1.3% excluding food and fuels, indicating a nuanced view of import price pressures [1][28][29]. - **Geopolitical Factors**: The geopolitical landscape continues to influence inflation dynamics, particularly in relation to oil prices and trade tariffs [1][5]. Conclusion - The conference call provided a comprehensive overview of global inflation trends, with a specific focus on the US market. The insights into core inflation rates, PPI trends, and the impact of geopolitical factors are crucial for understanding the current economic landscape and making informed investment decisions.

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report highlights uncertainty stemming from fluctuations in US trade policy, which has negatively impacted consumer and business sentiment in the US, while global sentiment remains relatively stable but low [1] - Despite the challenges, global retail sales and trade volumes have shown resilience, potentially due to preemptive purchasing ahead of tariff implementations [1] - Labor markets globally remain tight, and global Purchasing Managers' Index (PMI) readings indicate expansionary conditions in the first quarter [1] Summary by Sections Global Economic Indicators - US consumer and business sentiment has significantly declined due to rising tariff rates and trade policy uncertainty [1] - Global PMIs have generally remained above the expansion threshold of 50, indicating ongoing growth in manufacturing and services sectors [4][8][9] Retail Sales and Trade Volumes - Global retail sales value and volume have held up well, with year-over-year growth rates of 3.0% for value and 2.7% for volume [26][30] - Trade volumes have also shown positive growth, with a year-over-year increase of 5.7% for global trade [37] Labor Market Conditions - Labor markets are described as tight, with global unemployment rates projected to remain low [42] - Business confidence has seen fluctuations, but overall sentiment remains cautious [42][45] Inflation and Price Indices - Headline Consumer Price Index (CPI) inflation is reported at 1.5% globally, with core CPI at 3.5% [54][55] - Input prices have shown an upward trend, indicating potential inflationary pressures in the near future [21][22] GDP and Economic Growth - Real GDP growth is projected at 4.6% for the global economy, with developed markets (DM) at 2.9% and emerging markets (EM) at 2.0% [26][30] - The report forecasts continued economic expansion, albeit at a moderated pace due to external uncertainties [41][74]