- 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.
### Summary
German producer prices in July saw their first year-on-year decline in over two-and-a-half years, falling 6.0%, due to easing energy price pressures, signaling a potential abatement of inflation in Europe's largest economy.
### Facts
- 📉 German producer prices declined by 6.0% in July compared to the same month last year.
- ⚡ Energy prices sank 19.3% in July on a yearly basis, with electricity prices falling by 30.0%.
- ❌ Excluding energy prices, producer prices in July rose 2.0% compared to the previous year.
- 📉 On a monthly basis, producer prices decreased by 1.1% in July.
- 🔍 Germany's producer price index, a key indicator for inflation, fell to 6.5% in July.
Traders have reduced their expectations for a September interest rate hike in the euro area after weak business activity data from Germany.
Germany's business activity has seen a sharp decline, leading to concerns of a recession, as the country's Purchasing Managers' Index (PMI) dipped to its lowest level in over three years. This decline in activity is impacting the wider eurozone economy as well, with the region at risk of slipping into recession. This economic downturn is accompanied by a worrying uptick in inflation and slow growth, particularly in 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.
Germany's Chancellor warns that economic stimulus measures must be carefully designed to avoid fueling inflation, after the cabinet approves corporate tax cuts to boost growth; meanwhile, German consumer price inflation stands at 6.4%, slightly lower than the previous month but higher than expected.
German inflation fell slightly in August, but economists predict that the downward trend will continue in the coming months, with food prices showing above-average growth.
Euro zone inflation in August came in higher than expected at 5.3%, posing a challenge for the European Central Bank as it remains unchanged from the previous month.
US inflation remains above 3% as the cost of goods and services rose by 0.2% in July, prompting speculation that the Federal Reserve may freeze interest rates to manage inflation without causing a recession.
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.
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.
British grocery inflation fell to its lowest level in a year in September, with prices rising fastest in products such as eggs, sugar confectionery, and frozen potato products, providing some relief for consumers and the government.
Japan's annual wholesale inflation slowed for the eighth consecutive month in August, providing relief for households and retailers affected by previous increases in raw material imports.
The European Central Bank is expected to see inflation in the euro zone remain above 3% next year, which strengthens the case for an interest rate increase.
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.
Inflation in the UK fell to 6.7% in August, the lowest level in a year-and-a-half, driven by slower food price increases and a drop in hotel and air fare costs, although fuel prices rose; economists had expected the figure to increase due to rising fuel prices.
High inflation continues to pose challenges for central banks in Europe as some opt to pause interest rate hikes after nearly two years, leading to speculation on how long rates will remain at current levels and how to balance slowing economies, persistent inflationary pressures, and the delayed impact of rate hikes.
Despite expectations of higher interest rates causing a spike in unemployment and a recession, the Federal Reserve's rate hikes have managed to slow inflation without dire consequences, thanks to factors such as replenished supplies, changes in the job market, and continued consumer and business spending.
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.
Japan's core inflation slowed for the third consecutive month in September, mainly due to falling fuel costs, providing some relief for the fragile economic recovery; however, factory output remained flat in August, indicating the negative impact of weak global demand and China's economy.
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.
Wholesale level inflation surged more than expected in September, indicating the challenge of controlling price pressures in the economy, which has implications for the Federal Reserve's interest rate decisions.
The September CPI report showed slow and lumpy progress in inflation, with headline CPI growing at 3.7% year-over-year and core inflation decelerating to 4.1% growth, while the US Treasury Department's auction of Thirty Year Bonds resulted in disappointing results due to an imbalance in the equilibrium between demand and supply for US paper, causing disruptions in financial markets.
US inflation rose 3.7% in September, surpassing economists' expectations and remaining well above the Federal Reserve's target of 2%.
Headline inflation is expected to have eased in September, while pay growth is slowing, with economists predicting that annual inflation fell slightly to 6.5% from 6.7% in August, although it still remains well above the Bank of England's 2% target, and the jobs market weakening and reducing the need for employers to increase wages.
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.
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 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.
