Aurelia Butler

Its previous forecasts, from June, were for 1.9% and 1.1% GDP growth, respectively.In a statement ahead of elections for parliament next month, it predicted headline inflation this year at 7.3%, and at 3.9% in 2023, against previous forecasts of 6.1% and 2.9%, respectively. More

Central banks from the United States to Canada, Australia and Switzerland have lined up with aggressive rate rises recently. The European Central Bank last month delivered its first rate hike since 2011.Japan, which is yet to lift rates in this cycle, is the holdout dove among the 10 big developed economies.In total, those central banks have so far raised rates in this cycle by a combined 1,415 basis points.Here’s a look at where policymakers stand in the race to contain inflation.1) UNITED STATESThe Federal Reserve last month delivered its second straight 75 basis-point (bps) rate rise. Though inflation surprised by not rising in July, Fed officials have reiterated their determination to get on top of red-hot price pressures with tighter monetary policy. Following the inflation print markets reduced their bets on a third 75 bps move in September, now seeing a 40% chance. Even as growth worries mount, analysts say containing inflation will remain the Fed’s priority. Graphic: U.S. CPI vs 10-year Treasury yield https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrwyaavm/us%20cpi%20chart.PNG 2) CANADAThe Bank of Canada last month delivered the first 100-bps rate increase among the world’s advanced economies in the current policy-tightening cycle. It lifted its key policy rate to 2.5%.With annual inflation running way above target and the highest in nearly four decades, analysts reckon another rate hike in September is highly likely. Graphic: Canada in the hawkish camp https://fingfx.thomsonreuters.com/gfx/mkt/zdpxobjywvx/CA2107.PNG 3) NEW ZEALANDThe Reserve Bank of New Zealand on Wednesday delivered its seventh straight hike — and fourth consecutive rise of 50 bps — to lift rates to 3%, the highest since September 2015.The RBNZ also struck a more hawkish than expected tone as it battles soaring inflation. It now sees rates at 4% by early next year, compared to its previous projection of 3.7%, implying at least one more 50 bps rate hike at upcoming meetings. Graphic: RBNZ https://fingfx.thomsonreuters.com/gfx/mkt/movangbwrpa/Pasted%20image%201660737709275.png 4) BRITAINThe Bank of England this month lifted its key rate by half a percentage point to 1.75% – its highest level since late 2008.The BoE also warned that Britain was facing a recession with a peak-to-trough fall in output of 2.1%, similar to a slump in the 1990s. Despite those recession risks, double-digit inflation now has investors betting rates won’t peak until another 200 bps of hikes by May 2023. Graphic: BoE rate moves https://graphics.reuters.com/BRITAIN-BOE/myvmnenzgpr/chart.png 5) NORWAYNorway, the first big developed economy to kick off a rate-hiking cycle last year, on Thursday jacked up rates another 0.5% to 1.75% and said more hikes were in the pipeline, probably including one in September.6) AUSTRALIAThe Reserve Bank of Australia this month raised rates by 50 bps, tightening policy for a fourth month running. But it tempered guidance on further hikes as it forecast faster inflation but also a slowdown in the economy.The RBA has now delivered 175 bps of hikes since May, taking its key rate to 1.85%, in the most drastic tightening since the early 1990s. Graphic: G10 policy rates https://fingfx.thomsonreuters.com/gfx/mkt/gdpzyoaqevw/g10%20policy%20rates.PNG 7) SWEDENAnother late-comer to the inflation battle, Sweden’s Riksbank delivered a half percentage-point interest rate hike on June 30 to 0.75%, its biggest hike in more than 20 years.As recently as February, the Riksbank had forecast unchanged policy until 2024, but governor Stefan Ingves now expects rates to hit 2% in early 2023 and said 75 bps moves are possible.8) EURO ZONEThe ECB last month hiked its deposit rate by 50 bps — more than it initially guided — in its first rate rise since 2011 to fight soaring inflation. The move to 0% ended an eight year experiment with negative rates.The bank is expected to hike rates again at its next meeting on Sept. 8, with money markets pricing a full probability they will be jacked up to 0.5%. Graphic: ECB monetary policy https://fingfx.thomsonreuters.com/gfx/mkt/akpezkyqkvr/ecb%20monetary%20policy.PNG 9) SWITZERLANDOn June 16, the Swiss National Bank (SNB) unexpectedly raised its -0.75% interest rate, the world’s lowest, by 50 bps, sending the franc soaring.Recent franc weakness has contributed to driving Swiss inflation towards 14-year highs and SNB governor Thomas Jordan said he no longer saw the franc as highly valued. That has opened the door to more rate hikes including at its next meeting on Sept. 22.10) JAPANJapan is the holdout dove. The Bank of Japan in July maintained ultra-low interest rates of -0.1% and signalled its resolve to keep them that way even as it projected inflation would exceed its target this year.BOJ Governor Haruhiko Kuroda said he had no plan to raise rates or hike an implicit 0.25% cap set for the bank’s 10-year bond yield target, because Japan was still recovering from the pandemic and its terms of trade had worsened. Graphic: BOJ is the last dove standing https://fingfx.thomsonreuters.com/gfx/mkt/klvykrzggvg/Pasted%20image%201655441669556.png More

TORONTO (Reuters) – Canadian inflation is not likely to return to the central bank’s 2% target until 2024 after possibly peaking in June, as less volatile items like wages and rent displace energy as key sources of price pressure, analysts say. In a bid to return inflation to target, since March the Bank of Canada (BoC) has raised its benchmark interest rate by 225 basis points to 2.50%, including a full-percentage-point move in its last policy decision in July, the biggest single hike by a G7 country in this economic cycle.A slow grind back to target could make the central bank less willing to pivot to interest rate cuts next year if the economy moves into recession as some analysts expect.Earlier this month, expectations were building that the central bank would be cutting rates as soon as next March.”Even with the economy likely to see a mild recession next year, we think it will take until 2024 to get inflation back to target, or reasonably close,” said Josh Nye, senior economist at Royal Bank of Canada.The Bank of Canada’s latest forecast, in July, was for inflation to return to 2% by the end of 2024 and for the economy to avoid recession.Canadian inflation slowed to 7.6% in July on lower gasoline prices, down from an almost 40-year high of 8.1% in June, but measures of core price pressures that strip out the most volatile components, such as energy, continued to climb. The problem is that increases in slower-moving drivers of inflation like wages and rent are likely to be persistent, or sticky, even as commodity-price gains and some supply constraints caused by the COVID-19 pandemic and the Ukraine war ease, analysts say.”The biggest theme from this latest (inflation) reading is a significant rotation in where the most intense price pressures are coming from,” Doug Porter, chief economist at BMO Capital Markets, said in a note.”The Bank can scarcely back down anytime soon, as it has a long-term battle on its hands reining in 5% core inflation.”Investors appear to have taken note, with money markets now expecting the central bank’s benchmark interest rate to peak at about 3.75% in the first quarter of next year and stay close to that level through much of 2023. The Federal Reserve could also be facing a lengthy battle to bring inflation back to target. But it has a dual mandate of employment and price stability, unlike the single goal of low inflation pursued by Canada’s central bank.”The BoC is most likely biased towards taking the risk of overtightening rather than undertightening until they see enough evidence that demand is cooling,” said Jimmy Jean, chief economist at Desjardins Group. More

COLOMBO (Reuters) -Sri Lanka will ask Japan to invite the Indian Ocean island’s main creditor nations, including China and India, to talks on bilateral debt restructuring, as it seeks a way out of its worst economic crisis in decades, its president said on Thursday.”Someone needs to call in, invite the main creditor nations. We will ask Japan to do it,” President Ranil Wickremesinghe told Reuters in an interview, adding that he would travel to Tokyo next month and hold talks with Japanese premier Fumio Kishida.Sri Lanka, a country of 22 million people, is facing its most severe financial crisis since independence from Britain in 1948, resulting from the combined impact of the COVID-19 pandemic and economic mismanagement.Left with scant foreign exchange reserves, which have stalled the imports of essentials including fuel and medicines, ordinary Sri Lankans have been battling crippling shortages of months amid sky-rocketing inflation and a devalued currency.Public anger stoked unprecedented mass protests, which forced the country’s then president, Gotabaya Rajapaksa, to flee to Singapore in early July and then quit.Wickremesinghe, a six-time prime minister, won a parliamentary vote and took office as president on July 21.Besides seeking assistance from its allies, Sri Lanka is also in negotiations with the International Monetary Fund for a loan package of between $2 billion and $3 billion, Wickremesinghe said.Sri Lanka’s total bilateral debt was estimated at $6.2 billion at the end of 2020 by the IMF, according to a March report.Local broadcaster Newsfirst, citing a former ambassador, said on Wednesday that Rajapaksa would return home next week.Wickremesinghe said he was “not aware” of any such plans. More