Charting the Global Economy: Fed, ECB Policies May Diverge

Article content

(Bloomberg) — The Federal Reserve and European Central Bank moved ahead with rate hikes this week, even though policymakers in Washington indicated they were in the final round of their battle against inflation.

Article content

TAPE STORY: ECB President Christine Lagarde has admitted there is “more ground to cover” and the central bank is not stopping due to “massive” inflation. Fed Chair Jerome Powell hinted that officials may have room to stand their ground and assess the impact of their policy tightening against the backdrop of stress in the banking system.

Article content

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

world

Along with increases by the Federal Reserve and European Central Bank, Australia signaled further policy tightening ahead after unexpectedly raising interest rates. Norway’s central bank raised borrowing costs to the highest level since 2008 and signaled more to come. The Czech central bank kept its benchmark interest rate at 7%, Malaysia unexpectedly raised interest rates, and Brazil kept interest rates steady, resisting government calls for a looser policy.

Article content

Article content

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 that a greener world will be short of about six million tons of copper by the next decade, which means 12 new Oyu Tolgois need to come online within that time. BloombergNEF estimates that appetite for refined copper will grow 53% by 2040, but mine supply will only rise 16%.

we

Powell hinted that the latest Fed rate hike could be his last, but stopped short of declaring victory in his battle against rapid rate increases. The Fed Chairman said there is strong support for a 25 basis point rate hike. But he indicated that officials may pause their tightening campaign in June to assess how the economy responds to tightening credit conditions and recent pressures in the banking sector.

Article content

Anyone looking for signs of an impending downturn in the US economy will not find it in the latest employment data. That’s the takeaway from the latest monthly jobs numbers, which showed an acceleration in hiring and payout gains last month as working-age Americans continued to flood back into the labor market.

Washington’s ability to avert a catastrophic US debt default could fall to as few as seven days in May, highlighting the formidable threat of persistent partisan impasse. Time is short and the two sides are unlikely to strike a major deal before the deadline advised by Treasury Secretary Janet Yellen – increasing the likelihood of a short-term solution.

American consumers remain eager to spend, which gives companies that cater to them room to push ahead with price increases. This is a major takeaway in the middle of earnings season. Companies in the consumer staples sector, which include household names like Coca-Cola, Procter & Gamble and Hershey, excelled, reporting 90.5% of first-quarter results through May 2 that beat analyst expectations, versus 80% for the entire S&P 500. .

Article content

Europe

The European Central Bank delivered its smallest rate hike yet in its battle with persistently strong inflation, but insisted the move would not be the last. Officials raised the deposit rate by a quarter point to 3.25%, the highest rate since 2008. In what may be seen as a concession to hawkish officials, to win their support for the rate hike, the ECB also said it expects to halt reinvestment. Under the asset purchase program from July.

The UK economy is showing signs of unexpected resilience, which strengthens the case for interest rate hikes again. Figures on inflation expectations also indicated that companies expect a sharper rise in their prices over the next year.

Britain’s acute housing shortage, overcrowded planning departments and local protectionism combine to divide a nation where home ownership was once seen as a rite of passage. But beyond the thorny issues is a quieter reality: A decade of budget cuts has left local governments with far too few people to keep up with approval of new homes.

Article content

Asia

China’s economic recovery remains patchy, with the latest indicators pointing to a contraction in manufacturing, while consumers splurge over the holidays and the housing market continues to recover. Purchasing managers’ indices showed an unexpected drop in factory activity in April, dragged down by weak global demand for Chinese exports.

developing markets

The International Monetary Fund predicts that Saudi Arabia will not balance its budget if oil is below $80 a barrel, an adjustment that means the kingdom will return to fiscal deficits after its first surplus in nearly a decade.

– With assistance from Abeer Abou-Omar, Matthew Bossler, Enda Curran, Stephen T. Dennis, James Fernyhough, John Liu, Yujing Liu, Jonelle Mart, Reid Beckert, Jana Rando, Tom Reese, Zoe Schnewes, Damien Shepherd, and Alexander Weber.