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Charting the global economy: Fed, ECB policies may be different

The Federal Reserve and the European Central Bank raised interest rates this week, despite Washington’s policymakers signaling that they are in the final round of their fight against inflation.


(Bloomberg) — The Federal Reserve and the European Central Bank raised interest rates this week, even though Washington policymakers signaled they were in the final round of their fight against inflation.

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The story of the tape: ECB President Christine Lagarde admits there is “more ground to deal with” and the central bank is not pausing because of “significant” inflation. Fed Chair Jerome Powell hinted that officials may have a chance to stand their ground and gauge the impact of their policy tightening amid tensions in the banking system.


Here are some charts that appeared on Bloomberg this week of the latest developments in the global economy:


Besides the Fed and ECB interest rate hikes, Australia also signaled further policy tightening after unexpectedly raising interest rates. Norway’s central bank has raised borrowing costs to the highest level since 2008 and signaled much to come. The Czech central bank kept its base rate unchanged at 7%, Malaysia unexpectedly raised interest rates and Brazil left interest rates unchanged, protesting calls for policy easing from the government.


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Oyu Tolgoi, in southern Mongolia, just north of the Chinese border, is key to Rio Tinto Group’s efforts to expand into copper, the metal that underpins the clean energy transition. . But analysts at Wood Mackenzie estimate a greener world would be about six million tonnes short of copper over the next decade, meaning 12 new Oyu Tolgois need to be commissioned in that time frame. BloombergNEF estimates demand for refined copper will grow 53% by 2040, but mine supply will grow only 16%.


Powell hinted that the Fed’s latest rate hike could be the last, but did not declare victory in the battle against rapid price increases. The Fed chief said there was strong support for a 25 basis point increase in interest rates. But he suggested officials may pause the tightening campaign in June to gauge how the economy is responding to tighter credit conditions and recent stress in the banking sector. .

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Anyone looking for signs of an impending recession for the US economy won’t find it in the latest jobs data. That’s the draw from the latest monthly employment numbers, which showed an uptick in hiring and wage growth last month as working-age Americans continued to return to the labor market.

Washington’s ability to avert the risk of a catastrophic U.S. default is just seven days away in May, underscoring the enormous threat of an ongoing partisan standoff. Time is running out and it’s unlikely the two sides will reach a major deal before the potential X-date advised by Treasury Secretary Janet Yellen — increasing the likelihood of a short-term solution.

American consumers are still eager to spend, giving the companies that serve them the opportunity to raise prices even more. It’s an important step in the middle of earnings season. Companies in the consumer staples segment, which include familiar names like Coca-Cola, Procter & Gamble and Hershey, stand out with 90.5% reporting first-quarter results through May 2. , which beat analysts’ expectations, compared with 80% for the entire S&P 500.

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The ECB offered the smallest rate hike in its battle with persistently strong inflation but stressed that the move would not be the last. Officials raised the deposit rate by a quarter point to 3.25%, the highest level since 2008. In what could be seen as a concession to hawkish officials, to win support support for smaller rate hikes, the ECB also said it expected to pause reinvestment under its Asset Purchase Program from July.

The UK economy is showing unexpected signs of recovery, reinforcing the possibility of another interest rate hike. Inflation expectations figures also show that companies expect their own prices to rise further next year.

Britain’s dire housing shortage, growling planning departments and local protectionism are combining to divide a country where home ownership was once seen as a rite of passage. But alongside the thorny issues is a quieter reality: a decade of budget cuts has left local governments with too few people to keep up with approving new homes.

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China’s economic recovery remains patchy, with the latest indicators showing a contraction in manufacturing activity, while consumers spend lavishly during the holidays and the housing market continues. continuing recovery. The Purchasing Managers’ Index showed an unexpected drop in factory activity in April, driven by weaker global demand for Chinese exports.

Emerging Markets

The International Monetary Fund reckons that Saudi Arabia will not balance its budget if oil prices fall below $80 a barrel, a correction that would mean the kingdom will revert to a fiscal deficit after the run-up first surplus in nearly a decade.

—With assistance from Abeer Abu Omar, Matthew Boesler, Enda Curran, Steven T. Dennis, James Fernyhough, John Liu, Yujing Liu, Jonnelle Marte, Reade Pickert, Jana Randow, Tom Rees, Zoe Schneeweiss, Damian Shepherd, and Alexander Weber .


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