The Federal Reserve, after hitting pause on interest rate hikes in its prior meeting, opted for a 25 basis point increase this July, pushing the policy interest rate to 5.5 percent
Fed Chair Jerome Powell, while addressing the public following the decision, adopted a dovish tone, indicating that future decisions are open. Highlighting the significance of future data, Powell assured they would proceed cautiously, ready to act until decreases in inflation stabilize, basing their actions on upcoming macroeconomic indicators.
US inflation data came in at percent, nearing the 2 percent target. Unemployment was as expected at 3.6 percent, showing a decrease from the previous rate. Non-farm payrolls, a critical indicator, came in at 209,000, below both expectations and the last data. Average hourly earnings showed a promising increase, registering 0.4 percent. Notably, the global markets’ spotlight, the Job Openings and Labor Turnover Survey (JOLTS), recorded a decline at 9.824 million. The Institute for Supply Management’s (ISM) non-manufacturing Purchasing Managers’ Index (PMI) data was better than both expectations and the prior figure, at 53.9, while its manufacturing PMI saw a drop at 46.
Persistent high inflation remains in place in the Eurozone and UK
The European Central Bank (ECB), combating inflation with interest rate hikes, increased the policy interest rate by 25 basis points to 4.25 percent. EU inflation came in line with expectations at 5.5 percent, with a decrease from the previous level sparking positivity. Germany, the EU’s economic powerhouse, had an inflation level higher than before but as expected at 6.4 percent. Over in the UK, inflation sits high at 7.9 percent, albeit lower than the prior level and expectations. Manufacturing Purchasing Managers’ Index (PMI) data was a mixed bag, better than expected, but not as good as last time, coming in at 46.5.
Asian central banks held their ground this round
The Reserve Bank of Australia (RBA) kept the interest rate steady at 4.10 percent, defying expectations of a 25 basis point increase to 4.35 percent. Similarly, the Reserve Bank of New Zealand (RBNZ) maintained status quo. The bank, announcing a policy interest rate of 5.5 percent, signaled a growth-targeting policy marked by slowed interest rate hikes. In China, the People’s Bank of China (PBOC) kept the lowest loan interest rate unchanged at 3.55 percent. China reported inflation at 0 percent, underperforming against both expectations and previous levels, while the Caixin manufacturing PMI outdid expectations at 50.5. China’s industrial production expanded by 4.4 percent, but second quarter Gross Domestic Product (GDP) fell short of expectations at 6.3 percent.
In domestic markets, interest rates saw a gradual uptick
The Central Bank of the Republic of Turkey (CBRT) upped the policy interest rate by 250 basis points in its recent meeting, landing at 17.5 percent. The Turkish Statistical Institute (TURKSTAT) reported a slight easing in inflation at 38.21 percent, below both expectations and previous levels. Industrial production saw a contraction at -0.2 percent, but still better than the prior level. The unemployment rate fell to single-digit territory at 9.5 percent. Retail sales data posted an increase of 28.4 percent, while manufacturing PMI data mirrored its previous level at 51.50. While the Borsa Istanbul probed new record levels, the dollar to Turkish Lira exchange rate climbed above the 27 lira mark.
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