Main Topic: The Federal Reserve's strategy of raising interest rates to combat inflation and bring down the price of goods and services in the economy.
Key Points:
1. Increasing the cost of monthly credit payments helps to reduce overall economic activity and prevent inflation.
2. Higher interest rates make it more expensive for consumers and businesses to borrow money, leading to reduced spending and investment.
3. The goal is to bring down inflation to a target level of 2% and maintain price stability, which is crucial for a strong labor market and a resilient economy.
### Summary
Russia's currency, the ruble, has plunged to a 16-month low, leading to surging prices of sushi due to the country's economic challenges and rift with the West.
### Facts
- 💰 Russia's currency, the ruble, hit a 16-month low last week, as the country's current account suffers from Western sanctions.
- 🍣 Local prices of sushi in Russia are expected to surge by as much as 30% in the coming weeks due to the weakened ruble and strained relations with the West.
- 📈 Russia's official inflation rate reached a five-month high of 4.3% in July, but some economists estimate it to be over 60%.
- 🍱 Restaurateurs in Russia are already facing increased costs of sushi ingredients, such as rice, fish, and seaweed, which are imported and dependent on the dollar exchange rate.
- 💸 The embattled ruble sank past 100 to the dollar, prompting the Russian central bank to raise interest rates significantly.
- 📉 Capital outflows, reduced reliance on Russian oil by European nations, and falling export revenues have added to Russia's economic challenges.
- 🇷🇺 President Vladimir Putin held an emergency meeting to discuss measures for stabilizing the exchange rate, including export restrictions and limits on foreign currency movement.
Turkey's central bank raises interest rates to 25% in an effort to combat inflation, surpassing economist expectations and leading to a rally of the Turkish lira.
The Federal Reserve raised interest rates to their highest level in 22 years, but experts expect the market to react less dramatically than in the past.
The president of the Federal Reserve Bank of Philadelphia believes that the US central bank has already raised interest rates enough to bring inflation down to pre-pandemic levels of around 2%.
Central bankers are uncertain if they have raised interest rates enough, prompting concerns about the effectiveness of their monetary policies.
The Bank of England may have to increase interest rates if the US Federal Reserve decides to raise rates to cut inflation, in order to prevent the pound from weakening and inflation from rising further.
Traders believe that the US Federal Reserve will not raise interest rates further this year, as the latest jobs report showed an increase in unemployment and a cooling wage growth, prompting the Fed to potentially halt rate hikes and keep policy on hold.
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.
Russia's Central Bank plans to increase support for the ruble by selling a larger volume of foreign currency each day, in response to an upcoming payment of foreign currency bonds and to reduce market volatility caused by Western sanctions.
Russia's central bank plans to increase foreign currency sales by 830% to help repay a $3 billion Eurobond and calm ruble volatility.
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.
Pakistan's central bank is expected to raise interest rates to address inflation and bolster foreign exchange reserves, following a series of rate hikes earlier this year in response to economic and political crises.
Russia's economy ministry has raised its 2023 inflation forecast from 5.3% to 7.5% due to the impact of the war in Ukraine, and President Putin has acknowledged that high inflation is causing difficulties for businesses.
The European Central Bank may raise interest rates for a 10th consecutive meeting on Thursday, but the decision is uncertain.
The European Central Bank is facing a dilemma on whether to raise its key interest rate to combat inflation or hold off due to economic deterioration, with investors split on the likelihood of a rate hike.
The European Central Bank has raised key interest rates by 0.25 percentage points to help bring down inflation, although the economy is expected to remain weak for a while before slowly recovering in the coming years.
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.
Goldman Sachs predicts that the Federal Reserve will not raise interest rates at its upcoming annual meeting due to favorable inflation news and projected economic growth, but they expect a further hike later in the year.
The Bank of England is expected to raise interest rates to 5.5%, potentially marking the end of its tightening cycle, as concerns about a cooling economy grow among policymakers.
The Federal Reserve is expected to hold off on raising interest rates, but consumers are still feeling the impact of previous hikes, with credit card rates topping 20%, mortgage rates above 7%, and auto loan rates exceeding 7%.
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.
Turkey's central bank raises interest rates to 30% as it seeks to combat high inflation and stabilize the weakening lira.
Central banks, including the US Federal Reserve, European Central Bank, and Bank of England, have pledged to maintain higher interest rates for an extended period to combat inflation and achieve global economic stability, despite concerns about the strength of the Chinese economy and geopolitical tensions.
Double-digit interest rates and the possibility of further hikes are hitting the Russian economy hard, as the impact of higher industrial production and rising defense spending fade, leading to stagnation or decline in household consumption and investment.
Two former Federal Reserve policymakers disagree on whether the central bank should raise interest rates, with one saying rates have likely peaked and the other saying they need to be raised further, but both agree that achieving a soft landing for the economy is unlikely.
Minneapolis Federal Reserve Bank President Neel Kashkari believes that the Fed should raise borrowing rates further and keep them high for an extended period to bring inflation back down to the target of 2% due to the unexpected strength of the US economy.
Germany's inflation rate in September slowed to the lowest level since Russia invaded Ukraine, potentially leading the European Central Bank to reconsider its interest rate hikes.
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.
The Federal Reserve officials suggested that they may not raise interest rates at the next meeting due to the surge in long-term interest rates, which has made borrowing more expensive and could help cool inflation without further action.
Argentina's central bank raised the country's benchmark interest rate to 133% from 118% due to worse-than-expected inflation data, exacerbating the economic crisis ahead of the upcoming presidential elections.
Argentina's central bank has raised the benchmark interest rate to 133% as inflation data shows a higher-than-expected increase, exacerbating the country's economic crisis ahead of the upcoming presidential elections.