Charting the Global Economy: ECB Lowers Rates as Inflation Wanes

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(Bloomberg) — The European Central Bank cut interest rates for the third time this year as a rapid decline in inflation allows policymakers to provide support to the region’s faltering economy.

UK inflation fell below the Bank of England’s target, raising bets that central bankers will cut borrowing costs at their final two meetings this year. Meanwhile, US retail sales strengthened at the end of the third quarter in a sign of strong consumer spending.

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

Europe

The European Central Bank cut its key deposit rate by a quarter of a percentage point to 3.25%, and indicated that the process of taming prices should be completed “during the next year” – adjusting its previous language so that this milestone would only be reached in the second half of the year. 2025. This move comes in the wake of inflation falling below 2% for the first time since 2021, along with a decline in private sector activity and cracks in the flexible jobs market so far.

UK inflation fell below the Bank of England’s 2% target for the first time in more than three years, prompting investors to bet on a faster pace of interest rate cuts in the coming months.

Although policymakers in Washington or Beijing may have been calculating the EU’s slide into ineffectiveness for many years, it took some time for the politicians charged with actually directing the European economy to accept the seriousness of the challenges they face. But they’re starting to get it now.

Britain’s lowest-paid workers are enjoying strong pay growth, thanks in part to a huge increase in the minimum wage in April. This is good news for families struggling after a brutal cost of living crisis, but not for the Bank of England’s fight against inflation.

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Asia

Japan’s exports in September fell by the most since February 2021, dampening the country’s economic recovery momentum as global demand weakened. Shipments to China fell by 7.3%, while shipments to the United States and Europe fell by 2.4% and 9%, respectively.

Chinese export growth slowed unexpectedly in September, capping a trade rebound that had been a bright spot for a weak economy whose policymakers rely on manufacturing for power.

China’s armed forces conducted exercises off Taiwan that they said were aimed at warning against “separatist actions” – a move that came after the archipelago’s president pledged to stand up to Beijing’s challenges. A Chinese military spokesman said in a statement on social media that the exercises that took place on Monday involved army, naval, air and missile forces, adding that the exercises served as a “stern warning” to those seeking independence.

United States and Canada

US retail sales in September rose more than expected in a broad-based advance, demonstrating resilient consumer spending that continues to support the economy. Following the report, the Atlanta Fed’s GDP forecast pointed to a 3.6% annual increase in personal consumption for the third quarter, which would be the strongest pace this year.

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All but one of Canada’s big six lenders expect the central bank to cut borrowing costs by half a percentage point after inflation fell below policymakers’ target of 2% for the first time in more than three years. This shift highlights a growing consensus that the pace of gradual easing by policymakers may not be enough to prevent a persistent shortfall in the inflation target as the Canadian economy continues to weaken.

Emerging markets

Peru’s economy grew more than expected in August compared to the previous year, with growth still surprisingly strong after a recession in 2023. Growth was boosted by higher public spending that weighed on Peru’s deficit, which rose to 4% of GDP in August. Exceeding the legal limit of 2.8%.

world

Outside the European Central Bank, Thailand surprised by cutting interest rates by a quarter of a percentage point. The Philippine central bank cut interest rates for the second time this year, while Namibia and Chile also reduced borrowing costs. Singapore kept its monetary settings unchanged, while Indonesia, Turkey and Egypt also maintained their positions.

Sales of Apple Inc’s latest iPhones have soared. in China by 20% in the first three weeks compared to the 2023 model, a positive sign for a device that has struggled this year to gain traction in the world’s largest smartphone market. Although it’s just a three-week snapshot, the data suggests Apple’s 2024 launch will be better than last year.

-With assistance from Philip Aldrick, Irina Angell, Eric Hertzberg, Camille Kowalci, Yan Li, Alessandra Migliaccio, James Major, Tom Ries, Greg Ritchie, Marcelo Rochabrun, Vlad Savov, Zoe Schneeweiss, Craig Sterling, Jorge Valero, and Erika Yokoyama.

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