Inflation eases in the US and eurozone raising hopes of rate cuts

Today’s top stories

• Firebrand left-wing politician George Galloway has won the Rochdale by-election, claiming in his victory speech that he’ll be Starmer’s “worst nightmare”.

• Global carbon dioxide emissions from energy surged to a record high in 2023, hitting 37.4bn tonnes, according to the International Energy Agency.

• Germany and France called for an international investigation into the deaths of dozens of Gazans seeking humanitarian aid after Israeli troops opened fire close to an aid convoy.

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Good evening.

Inflation in the United States and the 20-country eurozone is easing, fuelling speculation that central banks may cut interest rates later this year after record-high rates since the Covid-19 pandemic and Russia’s full-scale invasion of Ukraine in February 2022.

US inflation eased to 2.4 per cent in the year to January, according to data published yesterday on personal consumption expenditures, slipping from December’s rate of 2.6 per cent. The core rate for PCE, which excludes changes in food and energy prices and is the Fed’s preferred measure of underlying inflation, was also in line with expectations at 2.8 per cent.

In the eurozone, inflation eased to 2.6 per cent in February. The figure was higher than the 2.5 per cent expected by economists as the cost of living for consumers continued to rise at persistently strong rates.

In the US, rate setters remain cautious. The Federal Reserve is unwilling to lower borrowing costs from current levels of 5.25 per cent to 5.5 per cent until it is confident price pressures have sustainably returned to its 2 per cent target.

Meanwhile, the European Central Bank is set to meet next week to discuss the future direction of interest rates amid signs the economy remains mired in stagnation. 

“The ECB is concerned about persistence in domestically generated inflation,” said Tomasz Wieladek, an economist at investor T Rowe Price, adding that services inflation was “clearly too strong”.

Senior ECB policymakers have played down the likelihood of an imminent rate cut while they assess if wage pressures are moderating enough to push inflation towards its 2 per cent target.

The inflation data lifted investor confidence in Europe, with the pan-European Stoxx 600 up 0.5 per cent and close to a record high. Shares in New York were higher in late-morning trading, with the S&P 500 up 0.2 per cent and the tech-heavy Nasdaq 0.4 per cent higher.

Need to know: UK and Europe economy

UK house prices rose more than expected in February, posting their first annual increase in more than a year, according to mortgage lender Nationwide.

A total of 117 MPs across all major political parties have written to the chancellor Jeremy Hunt urging him to allocate funding to compensate victims of the infected blood scandal in his spring Budget next week.

Thomas Jordan, the long-standing chair of the Swiss National Bank, has announced his resignation, bringing to an end a turbulent tenure of unorthodox policymaking. Jordan, who is the longest-serving governor of any major central bank, will step down in September.

Tech mania has gripped Turkey’s stock market with equities gaining 20 per cent in dollar terms as runaway inflation sends local savers piling into shares.

Need to know: global economy

Economic growth in Brazil stalled in the fourth quarter as consumer spending and agricultural production declined, signalling a slowdown in Latin America’s largest economy. Annual GDP growth was 2.1 per cent in the three months to December 31, down 0.1 percentage points from the previous quarter, the government statistics agency said earlier today.

China’s manufacturing activity has slowed for the fifth consecutive month with the country’s manufacturing purchasing managers’ index slipping to 49.1 in February from 49.2 in January.

The cobalt market has been overwhelmed by a record glut as Chinese companies boost their output, with the surplus of the key electric car battery metal set to last until 2028, according to an influential market report.

A US-born former Hollywood financier Philip Adkins is supplying Russia’s liquefied natural gas station in the Arctic Circle. The project, which is heavily sanctioned by the US in an attempt to curb Moscow’s influence on global energy markets, could significantly increase Russia’s share in the global LNG market.

Need to know: business

Elon Musk has sued OpenAI and its chief executive Sam Altman for breach of contract, alleging they have compromised the start-up’s original mission of building artificial intelligence systems for the benefit of humanity.

This comes after OpenAI, along with Microsoft, Nvidia and Amazon, was named as an investor in Figure AI, a Silicon Valley start-up that aims to introduce artificial intelligence-powered humanoid robots to the workforce and transform the global labour market.

The broadcaster ITV has sold its 50 per cent stake in BritBox International, a subscription streaming service, to BBC studios for £235mn. The deal comes as ITV faces fresh pressure on its balance sheet from a steep decline in advertising revenues.

Australian prime minister Anthony Albanese is “very concerned” about the impact of Meta’s latest move to stop paying local media companies this year for using their content.

Joe Biden has ordered an investigation into whether Chinese “connected” vehicles, including electric cars, pose a security risk to America, in a move seen as trying to prevent China from flooding the US auto market.

Boeing is set to pay $51mn to settle a US administrative charge over unauthorised exports, to countries including China, of technical data related to a range of US military weaponry including fighter jets and missile systems.

Science round-up

Prices for lab monkeys in China have plummeted, indicating a slowdown in the future pipeline of drugs undergoing clinical trials.

New research highlights the damage to cognition and memory from Covid-19, which can cause symptoms such as “brain fog”. The study shows however that the most severe cases can improve.

German pharma group Boehringer Ingelheim and Copenhagen-based Zealand Pharma said their weight-loss drug had achieved positive results in liver disease trials.

“Future-proofed” vaccines are being developed by a UK start-up using artificial intelligence. Baseimmune uses AI to help it predict future pathogen mutations in order to make jabs for coronavirus, malaria and African swine fever that will be more effective for longer.

Commentator Anjana Ahuja says putting a corporate figure at the head of publicly-funded UK science rather than someone from a research background would be a serious mistake. The possibility has been mooted for when Dame Ottoline Leyser steps down in 2025 as chief executive of UK Research and Innovation.

Some good news

Scientists from the University of Texas have managed to photograph the yellow-crested helmetshrike while trekking 75 miles through the Itombwe Massif mountain range in eastern Democratic Republic of Congo. The bird was listed as ‘lost’ by the American Bird Conservancy and had gone more than 20 years without being seen.

Source: Economy - ft.com