Financial and Monetary Systems

ECB cuts interest rates, and other economics stories to read this week

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EU flags flutter in front of European Central Bank (ECB) headquarters in Frankfurt, Germany July 18, 2024. REUTERS/Jana Rodenbusch

The ECB has cut interest rates by 25 basis points. Image: REUTERS/Jana Rodenbusch

Joe Myers
Writer, Forum Agenda
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  • This weekly round-up brings you the latest news from the world of economics and finance.
  • Top economy news: ECB cuts interest rates; US consumer prices rise; German inflation falls to its lowest level in over 3 years.

1. ECB cuts interest rates

The European Central Bank (ECB) has cut interest rates once again, lowering its deposit rate by 25 basis points. That brings the rate down to 3.5%, in a widely expected move amid slowing inflation and tepid economic growth.

Rates had also been cut in June, but the bank offered no indications of what its next move would be.

"The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction," the ECB said in a statement. "The Governing Council is not pre-committing to a particular rate path."

ECB President Christine Lagarde reiterated this, saying that the rate path was not predetermined, with decisions taken on a meeting-by-meeting basis.

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2. US consumer prices rise slightly

US consumer prices rose slightly in August by 0.2% month-on-month following a similar rise in July. However, underlying inflation remained stronger than hoped, with higher costs for housing and other services keeping it up.

Financial markets boosted the chance of a quarter-point rate cut next week at the Federal Reserve's next policy meeting, cutting sharply the odds of a half-point cut.

"The road to normal inflation hit a bump in August as lingering pressures for housing and service costs once again cropped up," Ben Ayers, Senior Economist at Nationwide, told Reuters. "This should clinch a smaller, 25 basis points rate cut from the Fed next week as Fed officials remain wary to feed any lingering price momentum for the economy."

In the 12 months through August, the consumer price index rose 2.5%, the smallest year-on-year rise since February 2021 and down from 2.9% in July.

Monthly change in US Consumer Price Index
US consumer prices are on the up - but only slightly. Image: Reuters
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3. News in brief: Stories on the economy from around the world

A new report says the UK needs an additional $1.3 trillion (£1 trillion) in investment in the next decade to grow its economy.

German inflation fell to its lowest level in more than three years last month, dropping to 2.0%, largely driven by lower energy prices.

The unemployment rate in South Korea fell to a record low of 2.4% in August, down from 2.5% in July.

The UK economy stagnated for a second month in July, with manufacturing output dropping sharply. Economic output showed no change, month-on-month, compared to July.

Monthly inflation in Argentina reached 4.2% in August, rising from the month before, and hitting 236.7% in the 12 months through August - the highest recorded level globally.

Chart showing inflation in Argentina.
Battling inflation in Argentina. Image: Reuters

In a survey by the country's central bank, economists have upgraded their expectations for Singapore's growth this year, rising to 2.6% from earlier forecasts of 2.4%.

Canada's unemployment rate nudged up to 6.6% in August, exceeding a seven-year peak, that doesn't include the COVID-19 pandemic years of 2020 and 2021.

India's retail inflation was slightly higher than economists' expectations in August, driven by a sharp rise in vegetable prices.

China's President Xi Jinping has called on the country's local and central governments to properly implement economic policies for the rest of the year in order to achieve its economic and social development goals.

Around 14.2 million Thais are set to receive around $296 (10,000 baht) each as part of a cash assistance programme to boost the economy.

4. More on finance and the economy from our blog

Meeting G20 cross-border payment targets will require collaboration between the public and private sectors, writes Mastercard's Alan Marquard. The public sector will need to match technological advances from the private sector to navigate geopolitical factors and drive standardization.

Improving brain health could provide an economic boost too, explain experts from the World Economic Forum, McKinsey & Company and Rice University. With brain disorders estimated to cost the global economy $5 trillion every year, the scaling of existing interventions could unlock years of higher quality of life.

1.4 billion people globally still have no access to bank accounts, but microfinance institutions are working to cut this number. In the Gulf Cooperation Council, organizations embracing Islamic financing are helping to boost financial inclusion.

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Contents
1. ECB cuts interest rates2. US consumer prices rise slightly3. News in brief: Stories on the economy from around the world4. More on finance and the economy from our blog

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