Inflation has finally begun to ease in the US and Europe, paving the way for central banks in both regions to consider lowering interest rates as soon as September.
In the US, the Federal Reserve’s preferred measure of core inflation rose just 1.7% on a three-month annualized basis in July, marking the slowest pace this year.
Across the Atlantic, Europe saw consumer prices rise by 2.2% in August compared to a year earlier—a significant slowdown from July’s 2.6%, and the mildest inflation rate since mid-2021.
Meanwhile, Tokyo’s inflation—a bellwether for Japan’s national data due in September—picked up steam in August, making a compelling case for the Bank of Japan to maintain its cautious approach to rate hikes while supporting economic growth.
Here’s a closer look at the latest global economic developments:
United States
The Fed’s favored gauge of inflation grew modestly in July, while household spending also edged up, solidifying expectations that the central bank might begin cutting rates next month.
However, weaker income growth and a drop in the savings rate could cast doubt on the sustainability of consumer spending moving forward.
Across US cities like Los Angeles, Chicago, and Boston, aging downtowns are wrestling with vacant offices and sluggish worker returns, while nearby neighborhoods are experiencing better fortunes, or even thriving.
These stark contrasts highlight the uneven recovery of commercial real estate and urban economies post-pandemic, affecting business recovery strategies in these regions.
As the cost of living continues to climb—up nearly 20% since 2020—American households are increasingly re-evaluating their insurance coverage, driven by a nearly 50% surge in auto insurance premiums, according to a new industry report.
Europe
Positive inflation news is buoying spirits at the Federal Reserve’s Jackson Hole symposium, where Fed Chair Jerome Powell, along with officials from the European Central Bank and the Bank of England, signaled that interest rates are poised to decline.
In the UK, house prices unexpectedly dropped in August, suggesting that affordability issues persist even after the Bank of England eased borrowing costs, according to a leading mortgage lender.
Asia
In Tokyo, consumer prices excluding fresh food rose 2.4% in August, up from 2.2% in July, according to the Ministry of Internal Affairs.
Following the BOJ’s late July rate hike, Governor Kazuo Ueda has signaled that further rate increases are on the table if price trends align with the bank’s projections.
China is advising domestic traders to cut back on foreign grain purchases as ample supplies and weaker-than-expected demand weigh on prices.
This strategy, aimed at supporting local growers, could have significant implications for global exporters like Australia and the US.
Additionally, China’s stock of mortgages has shrunk to its lowest level in nearly three years, highlighting the lack of confidence in the property market, which continues to drag down economic growth.
Officials are reportedly considering allowing homeowners to renegotiate their mortgage terms or refinance with different banks, according to Bloomberg News.
Emerging Markets
Government missteps and a lack of action from health agencies have allowed the mpox virus to evolve, making it easier for the virus to spread among humans.
Despite the availability of an effective vaccine—costing around $100 per dose—and large stockpiles in countries like the US, nations like Congo have yet to receive any.
Zambia’s annual inflation rate surged to a 32-month high in August as an El Niño-driven drought wreaked havoc on food prices.
This dry spell has complicated the central bank’s efforts to bring inflation back to its target range of 6% to 8% by next year, forcing it to keep interest rates elevated.
World
In Hungary, the central bank held its key interest rate steady for the first time in over a year, with Guatemala and Kazakhstan following suit.
Meanwhile, Israel’s central bank kept its benchmark rate at 4.5%, signaling that rate cuts are unlikely for the remainder of the year as the conflict in Gaza continues.
In contrast, the Dominican Republic opted to cut rates.
By tracking these global trends, businesses and investors can better navigate the shifting economic landscape, balancing caution with opportunity as inflation cools in some regions but persists in others.
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