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China’s reopening might lead to a boost in the economic landscape as researchers calculate an acceleration of the Chinese GDP towards 5.3% in this particular year, adding to spending which may result in soaring consumer prices, according to Bloomberg’s Economic newsletter.

The potential boost in growth might be a backwind in the global efforts of monetary tightening to tamper the inflation for the target of 2%. The Fed might increase its interest rate hike with about 25 bps this Wednesday, which is a slowdown of the tightening path due to a decrease in the PCE prices and consumer spending data – positive for the stocks, leading to short covering, and initiated core buying.

The possible growth factor by China is already visible in the recent manufacturing data. The official NBS Manufacturing PMI unexpectedly increased to 50.1 in January from previously 47.0. Pointing and indicating an expansion of the manufacturing sector above the 50.0 handle.

Therefore theFed might reconsider the exception to halt interest rate hikes around May due to the mentioned boosting factor by China. The additional Chinese monetary support might lead to higher demand for spending which should add to the inflationary pressure.

However, prices might get to be balanced in China due to higher production data and may cool the upside potential of inflation in a calculated way by China – the expected supply shock by Covid infections might be a risk factor to consider while mentioned data from the manufacturing does not point toward it for the moment

There are already some signs of a positive demand shock initiated by the purchasing managers' indexes which jumped to the expansionary area as well.

Seemingly and in summary, China’s reopening is around the most important factors for global growth, according to the head of the IMF.

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