(Bloomberg) — The Swiss National Bank surprised with the first interest-rate cut among its global peers, central bankers in Japan ended the most aggressive monetary stimulus in modern history and the Federal Reserve held the line on US borrowing costs.
As Fed policymakers stuck to their path of lowering rates this year, the Bank of England also moved closer to cuts.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Europe
Officials in Zurich lowered their benchmark to 1.5%, the first such reduction for one of the world’s 10 most-traded currencies since the pandemic abated. The central bank’s revised down inflation forecast suggests “a fundamental reassessment of the momentum of inflation,” said George Moran, European economist at Nomura International Plc.
The Bank of England took another step toward cutting interest rates in the coming months after two of its most ardent hawks dropped their demands for hikes. Catherine Mann and Jonathan Haskel joined an 8-1 majority on the Monetary Policy Committee to keep rates at a 16-year high of 5.25%, the latest sign that the BOE was edging toward easing policy later this year.
Euro-area labor-cost increases slowed at the end of last year, an outcome that is likely to provide encouragement for European Central Bank policymakers who are studying the strength of wages as a key input for their decision on when to cut interest rates.
Asia
Now that Japan increased interest rates for the first time since 2007, investors and economists are divided over how long it will take before the central bank opts for another hike. Governor Kazuo Ueda repeatedly said that real interest rates in Japan remain deeply negative, and renewed weakness in the yen may also spark concern among government officials seeking more action to firm up the currency.
Hong Kong has fast-tracked into law domestic security legislation, prompting fresh warnings from the US, European Union and UK that the move could muzzle open discussion in the global finance hub. President Xi Jinping’s government tightened its grip over Hong Kong in the wake of mass pro-democracy protests that rocked the semi-autonomous Chinese city in 2019.
US
Fed officials maintained their outlook for three interest-rate cuts this year and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent uptick in inflation. Policymakers signaled they remain on track to cut rates this year for the first time since March 2020, but they now see just three reductions in 2025, down from four forecast in December, based on the median projection.
The Biden administration is considering blacklisting a number of Chinese semiconductor firms linked to Huawei Technologies Co. after the telecom giant notched a significant technological breakthrough last year. The US government is pressing allies including the Netherlands, Germany, South Korea and Japan to further tighten restrictions on China’s access to semiconductor technology.
When the Fed raises interest rates, US households — in aggregate — usually get a boost to interest income that outweighs the extra cost of servicing debt. Not this time. Unlike every other Fed hiking cycle of the past half century, the latest one triggered a sharp decline in household net interest income.
World
In addition to the major central banks, Pakistan held its key interest rate at a record high, Indonesia kept its rate near a five-year high and Iceland maintained western Europe’s highest rate. Australia signaled it’s done tightening policy, Norway left rates at a 16-year high and Turkey raised in a surprise decision. Mexico delivered a much-awaited rate cut.
The BOJ finally ended an eight-year experiment with negative interest rates that has left more than $4 trillion in funds hunting for higher returns abroad. What comes next threatens to shake up money flows in Japan and across the world. One of the biggest questions is what happens to that big ball of money stashed overseas in assets including US government bonds, European power stations and Singapore equities. So far, markets have taken Japan’s first interest-rate hike since 2007 in stride.
Finland was crowned the world’s happiest country for the seventh consecutive year in the global life-satisfaction rankings, but a drop in living standards among young Americans meant the world’s biggest economy fell outside the top 20 for the first time. The UN list is based on factors such as gross domestic product, life expectancy, having someone to count on, a sense of freedom, generosity and perceptions of corruption.
Emerging Markets
Ghana’s economy expanded at its fastest pace in a year after the industry sector exited four straight quarters of contraction.
All across Israel, building sites are idle as a ban on Palestinian workers continues with no end in sight. It’s turned the bellwether construction industry into an economic-crisis epicenter, offering a glimpse of what awaits both sides if the war in Gaza permanently ruptures their precarious ties.
–With assistance from Galit Altstein, Irina Anghel, Bastian Benrath, Ruth Carson, Ekow Dontoh, Moses Mozart Dzawu, Toru Fujioka, Mackenzie Hawkins, Siuming Ho, Fadwa Hodali, Ben Holland, Sumio Ito, Masaki Kondo, Steve Matthews, Yoshiaki Nohara, Kati Pohjanpalo, Tom Rees, Yasufumi Saito and Zoe Schneeweiss.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
