Geo-Economics and Politics

What you need to know about the global economy this week

Debashis Dhara, a vegetable vendor, speaks on his mobile phone at a retail market area in Kolkata, India, 22 March 2022. Global economy this week: Food prices continue to play a role in driving inflation globally.

Global economy this week: Food prices continue to play a role in driving inflation globally. Image: REUTERS/Rupak De Chowdhuri/File Photo

Joe Myers
Writer, Forum Agenda
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Geo-economics

  • This weekly round-up brings you the latest stories from the world of economics and finance.
  • Top economy stories: US Fed raises rates again; Eurozone inflation hits record high in August; Inflation passes 70% in Sri Lanka.

Economy stories from around the globe

German producer prices rose in August at their strongest rate since records began – in annual and monthly terms. The increase was mainly driven by soaring energy prices. Producer prices of industrial products increased by 45.8% over the year, the Federal Statistical Office reported.

Japan's core inflation climbed to 2.8% last month – its fastest annual pace in nearly eight years. It means inflation has exceeded the central bank's 2% target for a fifth straight month. But Japan's central bank has retained its ultra-low interest rates and vowed to keep holding them down in an effort to support growth, putting it at odds with other central banks worldwide.

China kept its benchmark lending rates unchanged at a monthly fixing on 20 September. The one-year loan prime rate (LPR) remains 3.65%, while the five-year LPR is 4.30%.

The German economy is contracting, and the situation is likely to intensify over the winter as gas consumption is cut or rationed, the country's central bank said on 19 September.

The European Central Bank's action on monetary policy may weigh on growth, but price stability is the main priority, President Christine Lagarde said on 16 September.

Canada's annual inflation eased more than expected in August, despite food prices rising at their highest pace in 41 years. Its annual inflation rate slowed to 7.0% last month, below analyst forecasts of 7.3% and down from 7.6% in July.

Interest payments on UK government debt hit a new record for August, reaching £8.2 billion ($9.3 billion) last month.

Consumer inflation in Sri Lanka reached 70.2% in August, the statistics department reported on 21 September.

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Eurozone inflation hits record high

Eurozone inflation hit another record high in August, reaching 9.1%, EU statistics office Eurostat said on 16 September. The rise was driven by higher food and energy prices and is likely heading towards double figures.

Consumer price inflation in the 19 countries using the euro rose by 0.6% in the month. It also rose by 9.1% on the year – the highest rate since the euro was created in 1999.

Eurostat said that 3.95 percentage points of the year-on-year change came from more expensive energy – the costs of which surged because of Russia's invasion of Ukraine – and 2.25 points from food, alcohol and tobacco.

But even when excluding volatile energy and unprocessed food – what the European Central Bank calls core inflation – prices were still 5.5% higher than a year earlier, compared with 5.1% higher in July.

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US Federal Reserve raises interest rates again

The US Federal Reserve has once again raised interest rates, with a 0.75 percentage point increase announced on Wednesday – the third such rise in a row.

Fed Chair Jerome Powell said that he and fellow policy-makers would "keep at" their battle to lower inflation and was blunt about the "pain" to come. He cited rising joblessness and singled out the housing market as likely being in need of a "correction".

In a set of new projections, the Fed foresees its policy rate rising at a faster pace and to a higher level than expected. It also sees the economy slowing to a crawl and unemployment rising to a degree historically associated with recessions.

Recent inflation data has shown little to no improvement despite the Fed's aggressive tightening in June and July, and the labour market remains robust, with wages increasing as well.

Fed delivers another big interest rate hike
US interest rates have risen sharply this year. Image: Reuters
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Related topics:
Geo-Economics and PoliticsFinancial and Monetary SystemsEconomic Growth
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