• The United States Gross Domestic Product (GDP) rose 2.1% in 2022. Consumer spending was the main driver, contributing 1.9% to annual growth. The economic outlook improved in the second half of 2022, following two quarters of negative growth in the first half. Momentum has carried over into early 2023.

• The labor market was strong in 2022 and continued to show strength in early 2023. In 2022, an average of 399,000 new jobs were created per month and 4.8 million new jobs were added on an annual basis. The labor market has remained strong, adding over one million new jobs in the first quarter of 2023, with an average of 345,000 jobs per month.

• Inflation rose 8% in 2022, the highest annual level in four decades. It slowed to 5% in March 2023 from 6.5% in December 2022, building on a trend of moderating price increases that started after a peak of 9.1% was reached in June 2022. Core inflation, which excludes volatile energy and food categories, rose 5.6% in March, a slight increase from 5.5% in February. Although it has eased from a peak of 6.6% in September 2022, the March uptick shows underlying price pressures remain elevated. The rapid pace of price increases in 2022 added pressure on the Federal Reserve to raise rates aggressively to tame inflation.

• The Federal Reserve raised interest rates seven times in 2022, at the most aggressive pace since the 1980s, with the goal of slowing the economy enough to curb inflation. Interest rates were raised two more times in early 2023, with quarter-point increases on 1 February and 22 March 2023. The federal funds rate increased from near zero in March 2022 to roughly 5% in March 2023, the fastest increase on record.

• The sudden collapse of Silicon Valley Bank (SVB) in March 2023 was partly driven by assets that lost value when interest rates rose from near zero. Fixed-rate securities made up nearly 60% of SVB’s assets at the end of 2022. As interest rates increased, those bonds became less valuable. As the vast majority of the bank’s deposits were uninsured, it was particularly vulnerable to fears of a bank run that became selffulfilling.

The bank’s customers withdrew US$ 42 billion in just 24 hours, forcing SVB to sell its securities at a large loss. The collapse, which was followed by another bank failure (Signature Bank), reverberated through the banking sector domestically and abroad.