- The Bank of England raised its benchmark interest rate to 5.25% despite a slowdown in consumer-price rises, leading to speculation about when the central bank will end its monetary tightening.
- House prices in Britain fell by 3.8% in July compared to the same month last year, the sharpest decline since July 2009, but the average house price was still higher than earlier this year.
- The Bank of Japan raised its cap on the yield of Japanese ten-year government bonds from 0.5% to 1%, causing the yield to soar to nine-year highs.
- Turkey's annual inflation rate increased to 47.8% in July, the first rise since October, due in part to a new tax on fuel.
- The euro area's economy grew by 0.3% in the second quarter, with much of the growth attributed to changes in intellectual property shifting by multinationals based in Ireland for tax purposes. Germany's GDP growth rate was zero, and Italy's fell by 0.3%.
### Summary
The Czech Republic's inflation rate dropped to 10.2% in July, although it still ranks fourth among EU nations with the highest inflation rates.
### Facts
- 💰 The Czech Republic's inflation rate dropped to 10.2% in July, but it remains one of the EU nations with the highest inflation rates.
- 🇪🇺 The European Union as a whole saw a moderate drop in year-on-year inflation rate from 6.4% to 6.1% in July.
- 💹 The eurozone's inflation declined slightly from 5.5% to 5.3% in July.
- 📉 Inflation rates in the EU spiked last summer due to a surge in energy prices, reaching 9.8% for the EU and just under 9% for the eurozone.
- 📊 Among EU nations, Belgium had the lowest year-on-year inflation rate at 1.7%, while Hungary had the highest at 17.5%.
- 🌡️ In a month-on-month comparison, consumer prices in the EU remained stagnant in July, with a marginal 0.1% decline in the eurozone.
- 💶 The European Central Bank continues to face the challenge of persistently high inflation and has implemented nine consecutive interest rate hikes since July 2020.
- ⚖️ The Czech Republic has also maintained a similar strategy, keeping its base interest rate at 7% in an attempt to curb inflation and attract foreign investors.
Traders have reduced their expectations for a September interest rate hike in the euro area after weak business activity data from Germany.
The US economy is expected to slow in the coming months due to the Federal Reserve's efforts to combat inflation, which may lead to softer consumer spending and sideways movement in the stock market for the rest of the year, according to experts. Additionally, the resumption of student loan payments in October and the American consumer's credit card debt could further dampen consumer spending. Meanwhile, Germany's economy is facing a recession, with falling output and sticky inflation contributing to its contraction this year, making it the only advanced economy to shrink.
German consumer confidence is expected to decrease in September due to persistently high inflation rates and a lack of clear upward or downward trend in the consumption climate.
Australia's inflation slowed to a 17-month low in July due to declines in holiday travel and fuel prices, leading to expectations that the Reserve Bank of Australia will pause its rate hikes, signaling a potential end to tightening measures.
German inflation beats forecasts, complicating the ECB's task, while US labor data eases and GDP is revised lower, causing the dollar to weaken and the euro to strengthen.
Eurozone inflation remains at 5.3%, leading analysts to speculate that the ECB may consider pausing its interest rate hikes in light of a slowing economy.
UK inflation has slowed to a 17-month low of 6.8%, prompting expectations of potential interest rate cuts and concerns about the impact on house prices and mortgage rates.
Central banks across major developed and emerging economies took a breather in August with lower interest rate hikes amid diverging growth outlooks and inflation risks, while some countries like Brazil and China cut rates, and others including Turkey and Russia raised rates to combat currency weakness and high inflation.
Poland's central bank governor justifies the large interest rate cut despite high inflation, stating that prices are stabilizing.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
Annual core inflation in Mexico slowed to a 20-month low in August, below market forecasts, as the central bank maintains high interest rates to curb price increases.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
Russian President Vladimir Putin warned that Russia's economy would suffer if inflation is not controlled, stating that the central bank had to raise interest rates to 12% due to increasing inflation, causing difficulties in forming business plans. However, he stated that there were no concerns about rouble volatility and that the government had tools to keep currency and markets under control.
The European Central Bank has raised its main interest rate for the 10th consecutive time to tackle inflation, but indicated that further hikes may be paused for now, causing the euro to fall and European stocks to rally.
The Russian central bank has raised its key interest rate to 13% in response to inflationary pressures and a weak rouble, and warns that rates will remain high for a considerable period of time, with further rate increases possible in the future.
New research suggests that elevated interest rates may not have been the main cause of the decline in inflation, sparking a debate about whether the Federal Reserve needs to raise rates again.
Germany is projected to be the most heavily impacted by the global economic slowdown due to higher interest rates and weaker global trade, according to the Organisation for Economic Co-operation and Development (OECD), with its economy likely to shrink this year alongside Argentina and experience a weaker 2024. The slowdown in China, inflationary pressures, and tightening monetary policy are among the factors affecting Germany's growth. The OECD also warned of persistent inflation pressures in various economies and called for central banks to maintain restrictive interest rates until underlying inflationary pressures subside.
Inflation in Britain slowed for a third consecutive month in August, defying expectations of a rise due to higher fuel prices, with consumer prices rising 6.7 percent compared to the previous year, driven by slower increases in food prices and a decline in hotel room costs. Core inflation also fell more than anticipated, indicating a potential easing of inflationary pressures, though price growth remains uncomfortably high. The Bank of England is set to announce its decision on interest rates, with growing speculation that rates may be held steady due to signs of slowing inflation and a weak economy.
Sweden's central bank has raised interest rates for the eighth consecutive time to combat high inflation, as the country's economy shows signs of improvement, while Norway's central bank also opted to raise rates and signaled the likelihood of another hike in December.
The Bank of England has decided to halt interest rate rises due to unexpected inflation slowdown, while housing markets in major global economies, including the US, Germany, and the UK, are showing signs of slowing down. Additionally, there have been developments in various countries' economic outlooks and key interest rates.
Despite predictions of higher unemployment and dire consequences, the Federal Reserve's rate hikes have succeeded in substantially slowing inflation without causing significant harm to the job market and economy.
German inflation is likely to ease significantly in September based on data from five key German states, signaling the potential end of high inflation that has weighed on Europe's largest economy.
Euro zone annual inflation dropped to its lowest level since October 2021, falling to 4.3% in September, while core inflation decreased to 4.5%, prompting uncertainty over potential rate cuts by the European Central Bank.
The European Central Bank's efforts to curb inflation through interest rate hikes have led to the lowest inflation rate in the euro zone in two years, indicating a potential slowdown in economic growth.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
The sharp decline in inflation in Europe in September raises hopes for relief from high consumer costs, but concerns remain regarding higher oil prices and the ECB's ability to achieve its 2% inflation target.
Poland's central bank has lowered its key interest rate despite concerns that it is a political move, as the country's inflation rate drops to 8.2%; analysts speculate that the rate cut is aimed at assisting the conservative government ahead of the upcoming parliamentary elections.
New Zealand's inflation rate slowed more than expected in Q3, indicating that the country's central bank may have reached the end of its tightening cycle.
Canada's inflation rate slowed to 3.8% in September, supporting predictions of the Bank of Canada keeping interest rates steady.
Canada's annual inflation rate unexpectedly slowed to 3.8% in September, leading to reduced expectations for an interest rate hike next week.
Canada's inflation rate dropped to 3.8% in September, allowing the Bank of Canada to maintain its current interest rate.
The inflation rate in Britain remained steady in September, defying expectations of a small decline, due to a rise in fuel prices offsetting a slowdown in food inflation.
Japan's core inflation in September slowed below 3% for the first time in over a year but remained above the central bank target, maintaining expectations that policymakers will phase out ultra-easy monetary policy.
The failure of UK inflation to decrease despite rate hikes suggests that raising interest rates may not be an effective solution to tackle cost-push inflation caused by rising production costs rather than excessive demand, and coordination between central banks to lower rates may be a more appropriate approach.
In September, Russian banks' profits declined due to a slowdown in consumer lending caused by high interest rates, leading to concerns about the impact of further rate increases in the future.
The rate of U.S. inflation is slowing, but it's not slowing as quickly as earlier this year, with the Federal Reserve expecting a 0.3% increase in the core PCE price gauge in September, indicating that progress towards the Fed's 2% inflation target will likely happen at a much slower rate in the months ahead.
The Bank of Russia raised interest rates by 200 basis points to 15% due to a weak rouble, high inflation, and increased government spending, including the defense sector and military operations in Ukraine.
Russia's central bank raises key interest rate to 15% in an attempt to combat inflation and support the struggling rouble amidst the country's invasion of Ukraine and increased government spending on military resources.
Russia's Central Bank has raised its key interest rate to 15% in an effort to bring down high inflation caused by increased government spending, particularly on the war in Ukraine, which has led to rising domestic demand that outpaces production capabilities.
Russia's central bank has raised interest rates to 15% due to a steep rise in inflation caused by a limited capacity to respond to increased consumer demand, with inflation expected to continue rising to 7.5% by year-end before decreasing to 4% next year.
