Have you ever wondered by central banks around the world hike interest rates whenever inflation is high? We decode the math.

Why central banks hike rates to tame inflation?

The economic growth in the eurozone rebounded in the second quarter, according to the data released by the European Union’s (EU) agency, on Monday (July 31). The report has since led to a rise in European shares with the German blue-chip index or DAX hitting a record high.&nbsp;

<h2>Inflation in eurozone eases</h2>

The EU’s Eurostat data agency said that the growth in the 20 countries that use the euro referred to as the ‘eurozone’ reached 0.3 per cent over the second quarter, April-June period, after recording zero growth in the first three months of the year.&nbsp;

This comes after a long period of stagnation in the eurozone&nbsp;economy as inflation continues to fall from last year’s peak. According to the data, the inflation rate also declined from 5.5 per cent to 5.3 per cent in July.&nbsp;

Earlier this year, the European Commission (EC) winter forecasts also noted that the eurozone will narrowly avoid the technical recession which was expected last year in November as the growth since was 0.1 per cent quarter-on-quarter.&nbsp;

ALSO READ |&nbsp;<a href="https://www.wionews.com/business-economy/european-commission-raises-eurozone-growth-forecast-for-2023-is-expected-to-avoid-recession-561561">European Commission raises eurozone growth forecast for 2023 as inflation eases</a>

However, concerns about the inflation in the eurozone – which continues to be stubbornly high – remained. This is also in addition to fears about the slow growth and stagnated Gross Domestic Product (GDP) reported between April and June in the biggest European economy, Germany.&nbsp;

Meanwhile, the French and Spanish economies grew more than expected. “This won’t be welcome news in Frankfurt, and will help the hawk’s cause,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.&nbsp;

He added, “Coupled with scary-looking Q2 wage data, we still think that the ECB hawks will successfully push for one final hike in September before the data turn decisively against them. This is a close call.”

In the Eurozone, Belgium had the lowest inflation rate, at 1.6 per cent in July, according to the Eurostat data. However, the food and drink costs continue to rise sharply, at 10.8 per cent when compared with 11.6 per cent in June.&nbsp;

ALSO READ |&nbsp;<a href="https://www.wionews.com/business-economy/eurozones-inflation-tumbles-fuels-rate-cut-debate-in-european-central-bank-599500">Eurozone's inflation tumbles, fuels rate cut debate in European Central Bank</a>

<h2>European stocks rise after report</h2>

After the data by the EU agency was released, European shares rose, including&nbsp;the German DAX as it inched up 0.1 per cent and hit a record high for the second consecutive session, according to Reuters. The rise was attributed to drugs and pesticide maker Bayer.

Additionally,&nbsp;pan-European STOXX 600 and&nbsp;Italy's FTSE MIB index also witnessed a rise&nbsp;on Monday.&nbsp;

<h2>ECB interest rate hikes</h2>

The European Central Bank (ECB), which has also sought to calm the soaring inflation – following in the footsteps of the US Federal Reserve and Bank of England has aggressively raised interest rates – announced its ninth consecutive hike, last week.&nbsp;

While there has been a recent drop in inflation, the figures remain far higher than the ECB’s two-per cent target. After the latest hike, the interest rate stood at 3.75 per cent highest since 2000-01.&nbsp;

ALSO READ |&nbsp;<a href="https://www.wionews.com/business-economy/ecb-hikes-quarter-percentage-points-warns-of-persistence-inflation-620122">ECB hikes interest rate by 0.25 percentage points as inflation spooks Eurozone</a>

While ECB president Christine Lagarde last week indicated that the aggressive interest rate hikes could be paused, analysts suggest another hike is still a possibility which might further constrain economic growth.

Bert Colijn, senior eurozone economist at ING, a global financial institution, said that the recent eurozone GDP reading would not be “a dovish argument” at the next ECB rate-setting meeting in September, “leaving a further hike on the table,” report AFP.&nbsp;

(With inputs from agencies)&nbsp; 
 
 
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The economic growth in the eurozone rebounded in the second quarter, according to the data released by the European Union’s (EU) agency, on Monday (July 31). The report has since led to a rise in European shares with the German blue-chip index or DAX hitting a record high.

The economic growth in the eurozone rebounded in the second quarter, according to the data released by the European Union’s (EU) agency, on Monday (July 31). The report has since led to a rise in European shares with the German blue-chip index or DAX hitting a record high. Inflation in eurozone eases The EU’s Eurostat data agency said that the growth in the 20 countries that use the euro referred to as the ‘eurozone’ reached 0.3 per cent over the second quarter, April-June period, after recording zero growth in the first three months of the year. This comes after a long period of stagnation in the eurozone economy as inflation continues to fall from last year’s peak. According to the data, the inflation rate also declined from 5.5 per cent to 5.3 per cent in July. Earlier this year, the European Commission (EC) winter forecasts also noted that the eurozone will narrowly avoid the technical recession which was expected last year in November as the growth since was 0.1 per cent quarter-on-quarter. ALSO READ | European Commission raises eurozone growth forecast for 2023 as inflation eases However, concerns about the inflation in the eurozone – which continues to be stubbornly high – remained. This is also in addition to fears about the slow growth and stagnated Gross Domestic Product (GDP) reported between April and June in the biggest European economy, Germany. Meanwhile, the French and Spanish economies grew more than expected. “This won’t be welcome news in Frankfurt, and will help the hawk’s cause,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. He added, “Coupled with scary-looking Q2 wage data, we still think that the ECB hawks will successfully push for one final hike in September before the data turn decisively against them. This is a close call.” In the Eurozone, Belgium had the lowest inflation rate, at 1.6 per cent in July, according to the Eurostat data. However, the food and drink costs continue to rise sharply, at 10.8 per cent when compared with 11.6 per cent in June. ALSO READ | Eurozone's inflation tumbles, fuels rate cut debate in European Central Bank European stocks rise after report After the data by the EU agency was released, European shares rose, including the German DAX as it inched up 0.1 per cent and hit a record high for the second consecutive session, according to Reuters. The rise was attributed to drugs and pesticide maker Bayer. Additionally, pan-European STOXX 600 and Italy's FTSE MIB index also witnessed a rise on Monday. ECB interest rate hikes The European Central Bank (ECB), which has also sought to calm the soaring inflation – following in the footsteps of the US Federal Reserve and Bank of England has aggressively raised interest rates – announced its ninth consecutive hike, last week. While there has been a recent drop in inflation, the figures remain far higher than the ECB’s two-per cent target. After the latest hike, the interest rate stood at 3.75 per cent highest since 2000-01. ALSO READ | ECB hikes interest rate by 0.25 percentage points as inflation spooks Eurozone While ECB president Christine Lagarde last week indicated that the aggressive interest rate hikes could be paused, analysts suggest another hike is still a possibility which might further constrain economic growth. Bert Colijn, senior eurozone economist at ING, a global financial institution, said that the recent eurozone GDP reading would not be “a dovish argument” at the next ECB rate-setting meeting in September, “leaving a further hike on the table,” report AFP. (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

Eurozone economy returns to growth after inflation eases in July; Germany’s DAX hits new record

As of now as countries battle global and inflation post the covid-19 pandemic the UK is facing a particularly tough time scrambling through a cost of living and housing crisis.

UK economy struggles with inflation

UK inflation: Post Brexit trade ties with the rest of the Europe shrinking

The US Federal Reserve on Wednesday raised its interest rates by 25 basis points to a range of 5.25-5.50 per cent, the highest in 22 years.&nbsp;Across the Atlantic, the European Central Bank, which regulates the euro zone, also raised its rates by 25 basis points to 3.75 per cent, the highest level since 2000-01.

Aggressive rate hikes are not limited to the United States or the euro zone. Sixteen of the the G20 countries - the biggest economies in the world - have raised rates over the past year. The only exceptions to this trend are Japan and China - the world's third-and second-largest economies respectively.

China has been cutting rates intermittently in order to boost its flagging economy. In June this year, its central bank cut a key medium-term lending rate from 2.75 per cent to 2.65 per cent. Japan, on the other hand, has been following an unconventional monetary policy, wherein the interest rate is near-zero.

But one country took the cake when it came to its monetary policy: Turkiye. The country took a contrarian approach and began cutting rates from the end of 2021. This however led to the Turkish Lira losing&nbsp;about 60 per cent of its value and burdening the government with high debt.

But whether countries hiked or cut interest rates, there has been one common factor influencing these decisions - high inflation.

'Black swan' events and inflation

When author Nassim Nicholas Taleb coined the term 'Black Swan' in his book of the same name, he may not have imagined the enormous impact of the word on the global economy. A 'black swan' event is an unexpected and random incident which has a long-lasting impact on the economy.

The Covid-induced global lockdowns and the ongoing Ukraine war are clearly 'black swan' events. The twin events, which hit the world within a gap of two years, continue to disrupt the global supply chains and commodities markets, leading to a slowdown in the global economy and massive inflation worldwide.

Global inflation continues to be above the pre-pandemic (2017-19) levels of 3.5 per cent. According to the International Monetary Fund's forecast, the global headline inflation -- this includes prices of food and energy -- stood at 8.7 per cent last year. It fell to 6.8 per cent in 2023 and is expected to further decline to 5.2 per cent in 2024.

The inflation monster has eaten into the pockets of people living in advanced as well as poorer countries. To put inflation&nbsp;numbers in&nbsp;perspective: Venezuela had an inflation rate of 400 per cent as per a 2023 IMF estimate, while inflation in the UK is expected to be around seven per cent this year. The UK's inflation rate is the highest among the advanced countries in 2023. &nbsp;

Decoding central bank's interest rate logic

Major central banks across the world have been raising their interest rates aggressively to combat surging inflation. In 21st Century economics, this is commonly called the 'Taylor rule'. Named after the US new-Keynesian economist John B Taylor, the rule entails a higher interest rate when the inflation rate is higher and vice versa.

The conventional argument is that a high interest rate makes it costlier for people to borrow money. With borrowing getting expensive, consumers are forced to spend less. When spending declines, there is a fall in demand. It is therefore postulated that weakening demand will eventually reduce the price of goods.

This is precisely the logic behind global central banks rising the interest rates, when the inflation rate is not in the target range. Inflation targetting is a major monetary policy tool used by central banks to keep inflation within a tolerable range. This tolerance band varies from country to country. In the US, the inflation target is at 2 per cent. In India, the target is 4 per cent, with 2 per cent being the lower range and six per cent being the upper limit.

The conventional monetary strategy has helped countries bring down inflation, though not to the levels they believe are ideal.

Negative impact of rate hikes

High interest rates however have an unintended negative pull on the economy. The ongoing economic downturn around the world is an example of central banks prioritising lower inflation over healthy economic growth.

To be fair, it is tough to be a central banker in 2023. Two 'black swan' events have threatened the global economy. Some countries are on the brink of bankruptcy, while some are facing the heat of rising cost of living. So, controlling inflation has become the priority.

But eventually, no country can truly come out of economic misery by just adjusting the monetary policy. That would mean prolonged stress on the growth prospects of a country.

Higher interest rates lead to a domino effect, with severe long-term consequences for economic growth. Higher interest rates lead to a fall in consumer demand as people have less income to spend. This in turn impacts industrial output as lower demand means less production. Eventually, lower industrial performance forces companies to lay off employees, leading to a rise in unemployment.

The ongoing global economic downturn encapsulates the domino effect pretty well. Many now argue that the looming fear of recession in several advanced countries is a result of central banks continuing with unabated rate hikes.

Currently, central bankers face a two-fold challenge. They need to deliver on economic growth to avoid a recession and also tame high inflation. It will be a tough balancing act. In monetary policy, that's called 'soft landing' - a situation where central banks will raise rates enough to fight inflation but without causing a severe economic downturn.

The US Federal Reserve on Wednesday raised its interest rates by 25 basis points to a range of 5.25-5.50 per cent, the highest in 22 years. Across the Atlantic, the European Central Bank, which regulates the euro zone, also raised its rates by 25 basis points to 3.

The US Federal Reserve on Wednesday raised its interest rates by 25 basis points to a range of 5.25-5.50 per cent, the highest in 22 years. Across the Atlantic, the European Central Bank, which regulates the euro zone, also raised its rates by 25 basis points to 3.75 per cent, the highest level since 2000-01. Aggressive rate hikes are not limited to the United States or the euro zone. Sixteen of the the G20 countries - the biggest economies in the world - have raised rates over the past year. The only exceptions to this trend are Japan and China - the world's third-and second-largest economies respectively. China has been cutting rates intermittently in order to boost its flagging economy. In June this year, its central bank cut a key medium-term lending rate from 2.75 per cent to 2.65 per cent. Japan, on the other hand, has been following an unconventional monetary policy, wherein the interest rate is near-zero. But one country took the cake when it came to its monetary policy: Turkiye. The country took a contrarian approach and began cutting rates from the end of 2021. This however led to the Turkish Lira losing about 60 per cent of its value and burdening the government with high debt. But whether countries hiked or cut interest rates, there has been one common factor influencing these decisions - high inflation. 'Black swan' events and inflation When author Nassim Nicholas Taleb coined the term 'Black Swan' in his book of the same name, he may not have imagined the enormous impact of the word on the global economy. A 'black swan' event is an unexpected and random incident which has a long-lasting impact on the economy. The Covid-induced global lockdowns and the ongoing Ukraine war are clearly 'black swan' events. The twin events, which hit the world within a gap of two years, continue to disrupt the global supply chains and commodities markets, leading to a slowdown in the global economy and massive inflation worldwide. Global inflation continues to be above the pre-pandemic (2017-19) levels of 3.5 per cent. According to the International Monetary Fund's forecast, the global headline inflation -- this includes prices of food and energy -- stood at 8.7 per cent last year. It fell to 6.8 per cent in 2023 and is expected to further decline to 5.2 per cent in 2024. The inflation monster has eaten into the pockets of people living in advanced as well as poorer countries. To put inflation numbers in perspective: Venezuela had an inflation rate of 400 per cent as per a 2023 IMF estimate, while inflation in the UK is expected to be around seven per cent this year. The UK's inflation rate is the highest among the advanced countries in 2023. Decoding central bank's interest rate logic Major central banks across the world have been raising their interest rates aggressively to combat surging inflation. In 21st Century economics, this is commonly called the 'Taylor rule'. Named after the US new-Keynesian economist John B Taylor, the rule entails a higher interest rate when the inflation rate is higher and vice versa. The conventional argument is that a high interest rate makes it costlier for people to borrow money. With borrowing getting expensive, consumers are forced to spend less. When spending declines, there is a fall in demand. It is therefore postulated that weakening demand will eventually reduce the price of goods. This is precisely the logic behind global central banks rising the interest rates, when the inflation rate is not in the target range. Inflation targetting is a major monetary policy tool used by central banks to keep inflation within a tolerable range. This tolerance band varies from country to country. In the US, the inflation target is at 2 per cent. In India, the target is 4 per cent, with 2 per cent being the lower range and six per cent being the upper limit. The conventional monetary strategy has helped countries bring down inflation, though not to the levels they believe are ideal. Negative impact of rate hikes High interest rates however have an unintended negative pull on the economy. The ongoing economic downturn around the world is an example of central banks prioritising lower inflation over healthy economic growth. To be fair, it is tough to be a central banker in 2023. Two 'black swan' events have threatened the global economy. Some countries are on the brink of bankruptcy, while some are facing the heat of rising cost of living. So, controlling inflation has become the priority. But eventually, no country can truly come out of economic misery by just adjusting the monetary policy. That would mean prolonged stress on the growth prospects of a country. Higher interest rates lead to a domino effect, with severe long-term consequences for economic growth. Higher interest rates lead to a fall in consumer demand as people have less income to spend. This in turn impacts industrial output as lower demand means less production. Eventually, lower industrial performance forces companies to lay off employees, leading to a rise in unemployment. The ongoing global economic downturn encapsulates the domino effect pretty well. Many now argue that the looming fear of recession in several advanced countries is a result of central banks continuing with unabated rate hikes. Currently, central bankers face a two-fold challenge. They need to deliver on economic growth to avoid a recession and also tame high inflation. It will be a tough balancing act. In monetary policy, that's called 'soft landing' - a situation where central banks will raise rates enough to fight inflation but without causing a severe economic downturn.

Decoded: Why central banks hike interest rates to tame inflation 

The European Central Bank (ECB) on Thursday increased its interest rate by&nbsp;0.25 percentage point, bringing it to 3.75 percent. This is the highest interest rate level since 2000-01.&nbsp;The latest hike, the ninth consecutive,&nbsp;reflected&nbsp;that taming&nbsp;inflation continues to be the top priority for the ECB.&nbsp;

In a statement, the ECB expressed its determination to bring&nbsp;inflation back to its medium-term target of two percent in a timely manner. "Inflation continues to decline but is still expected to remain too high for too long," the ECB added.&nbsp;

Following the decision, the euro fell 0.3 percent versus the US dollar, trading at $1.105. The Stoxx 600 increased by 1.2 percent, while government bond rates fell. The reactions indicate that market participants are likely to expect future rate rises in the eurozone.

In the last few months, inflation has shown some signs of cooling down in the Eurozone. In June, inflation dropped to 5.5 percent, down from the 6.1 percent recorded in May. While this decline is a positive development, it is essential to note that it remains significantly higher than the ECB's target of two percent.

Furthermore, an recent ECB survey revealed that business loans in the Eurozone fell to their lowest level between the middle of June and early July. Data on Eurozone economic activity released earlier this week showed a decline in the region's two largest economies, Germany and France. The numbers have fueled speculation that the eurozone would enter a recession this year.

However, in some relief for the Euro zone, the ECB did raise the possibility of a rate pause in September. Speaking to media personnel after the announcement, ECB President Christine Lagarde said, "What I can assure you of is that we are not going to cut. That is a definite no. But on the other side, (there) could be a hike, (there) could be a pause."

Now all eyes are on the latest inflation data, which will come out next week. This will set the course for the ECB's monetary policy for the rest of the year.&nbsp;

(With inputs from agencies)

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The European Central Bank (ECB) on Thursday increased its interest rate by 0.25 percentage point, bringing it to 3.75 percent. This is the highest interest rate level since 2000-01.

The European Central Bank (ECB) on Thursday increased its interest rate by 0.25 percentage point, bringing it to 3.75 percent. This is the highest interest rate level since 2000-01. The latest hike, the ninth consecutive, reflected that taming inflation continues to be the top priority for the ECB. In a statement, the ECB expressed its determination to bring inflation back to its medium-term target of two percent in a timely manner. "Inflation continues to decline but is still expected to remain too high for too long," the ECB added. Following the decision, the euro fell 0.3 percent versus the US dollar, trading at $1.105. The Stoxx 600 increased by 1.2 percent, while government bond rates fell. The reactions indicate that market participants are likely to expect future rate rises in the eurozone. In the last few months, inflation has shown some signs of cooling down in the Eurozone. In June, inflation dropped to 5.5 percent, down from the 6.1 percent recorded in May. While this decline is a positive development, it is essential to note that it remains significantly higher than the ECB's target of two percent. Furthermore, an recent ECB survey revealed that business loans in the Eurozone fell to their lowest level between the middle of June and early July. Data on Eurozone economic activity released earlier this week showed a decline in the region's two largest economies, Germany and France. The numbers have fueled speculation that the eurozone would enter a recession this year. However, in some relief for the Euro zone, the ECB did raise the possibility of a rate pause in September. Speaking to media personnel after the announcement, ECB President Christine Lagarde said, "What I can assure you of is that we are not going to cut. That is a definite no. But on the other side, (there) could be a hike, (there) could be a pause." Now all eyes are on the latest inflation data, which will come out next week. This will set the course for the ECB's monetary policy for the rest of the year. (With inputs from agencies) WATCH WION LIVE HERE

ECB hikes interest rate by 0.25 percentage points as inflation spooks Eurozone

The US economy surprisingly accelerated to a 2.4% annual growth rate from April through June, showing continued resilience in the face of steadily higher interest rates resulting from the federal reserve’s 16-month-long fight to bring down inflation.

US economy accelerated to a 2.4% growth rate in April-June quarter | World Business Watch

The European Central Bank (ECB) has raised its interest rate by 0.25 percentage points. With the latest hike, the ECB's current interest rate stands at 3.75%, this is a 23-year-high and indicates that the fight against inflation is far from over.

European central bank hikes rates from 3.5% to 3.75% | World Business Watch

The U.S. Federal Reserve on Wednesday&nbsp;raised the interest rate by&nbsp;0.25&nbsp;percentage points&nbsp;to 5.5 percent. This is the highest interest level seen&nbsp;in the last 22 years.&nbsp;

During a press conference following the latest policy move, Powell emphasized that the central bank is closely monitoring incoming data, particularly for indications of the economy moving towards a period of "below-trend" growth, which he believes is necessary for inflation to decrease.

Following the release of the Federal Reserve's policy statement, Treasury rates in the United States experienced volatility, leading to a decline. However, U.S. stocks concluded the day with a relatively flat performance. Futures markets indicated minimal fluctuations in betting on the trajectory of Fed rate increases for the remainder of the year, with only a slight possibility of a hike in September.

Fed's inflation tackling and indicator monitoring

The U.S. Federal Reserve's decision to raise interest rates, as anticipated, followed two days of meetings. Inflation remains a persistent concern for the central bank, prompting the 11th rate hike in the last 12 meetings aimed at curbing the surging prices.

Nonetheless, the central bank remains vigilant, ready to respond to the evolving economic data and inflation outlook, while also considering the risks associated with falling inflation and weak economic indicators. Powell emphasized that decisions will be made on a meeting-by-meeting basis, carefully evaluating the incoming data's implications on economic activity and inflation dynamics, along with the balance of risks.

Key price indicators are continuing to rise at a rate that exceeds the Fed's target, with inflation showing a slowdown but no noticeable impact on the job market, which maintains a low unemployment rate of 3.6 percent. Economic growth has remained above the Fed's estimated 1.8 percent trend rate, with analysts predicting similar growth in second-quarter GDP.

Possibility of another hike in September

While Federal Reserve Chair Jerome Powell expressed optimism for a "soft landing" of the economy, wherein inflation decreases, unemployment remains low, and a recession is averted, his remarks on the necessity for slower development hint at a possible inclination towards higher rates to exert greater pressure on demand.

Powell stated, "It is certainly possible that we would raise the (federal) funds rate again at the September meeting if the data warranted it, and I would also say that it is possible that we would choose to hold steady at that meeting if that was the right policy call."

While the Fed remains open to future rate adjustments, Powell cautioned against expecting any rate cuts in the immediate future, affirming, "We'll be comfortable cutting rates when we're comfortable cutting rates, and that won't be this year."

Fed Chair Jerome Powell acknowledged the positive development of reduced inflation from last year's highs. However, as the central bank navigates a challenging phase in its fight against inflation, it faces the delicate task of balancing the need for future rate hikes against the risks of going too far, potentially resulting in economic losses.

&nbsp;

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The U.S. Federal Reserve on Wednesday raised the interest rate by 0.25 percentage points to 5.5 percent. This is the highest interest level seen in the last 22 years.

The U.S. Federal Reserve on Wednesday raised the interest rate by 0.25 percentage points to 5.5 percent. This is the highest interest level seen in the last 22 years. During a press conference following the latest policy move, Powell emphasized that the central bank is closely monitoring incoming data, particularly for indications of the economy moving towards a period of "below-trend" growth, which he believes is necessary for inflation to decrease. Following the release of the Federal Reserve's policy statement, Treasury rates in the United States experienced volatility, leading to a decline. However, U.S. stocks concluded the day with a relatively flat performance. Futures markets indicated minimal fluctuations in betting on the trajectory of Fed rate increases for the remainder of the year, with only a slight possibility of a hike in September. Fed's inflation tackling and indicator monitoring The U.S. Federal Reserve's decision to raise interest rates, as anticipated, followed two days of meetings. Inflation remains a persistent concern for the central bank, prompting the 11th rate hike in the last 12 meetings aimed at curbing the surging prices. Nonetheless, the central bank remains vigilant, ready to respond to the evolving economic data and inflation outlook, while also considering the risks associated with falling inflation and weak economic indicators. Powell emphasized that decisions will be made on a meeting-by-meeting basis, carefully evaluating the incoming data's implications on economic activity and inflation dynamics, along with the balance of risks. Key price indicators are continuing to rise at a rate that exceeds the Fed's target, with inflation showing a slowdown but no noticeable impact on the job market, which maintains a low unemployment rate of 3.6 percent. Economic growth has remained above the Fed's estimated 1.8 percent trend rate, with analysts predicting similar growth in second-quarter GDP. Possibility of another hike in September While Federal Reserve Chair Jerome Powell expressed optimism for a "soft landing" of the economy, wherein inflation decreases, unemployment remains low, and a recession is averted, his remarks on the necessity for slower development hint at a possible inclination towards higher rates to exert greater pressure on demand. Powell stated, "It is certainly possible that we would raise the (federal) funds rate again at the September meeting if the data warranted it, and I would also say that it is possible that we would choose to hold steady at that meeting if that was the right policy call." While the Fed remains open to future rate adjustments, Powell cautioned against expecting any rate cuts in the immediate future, affirming, "We'll be comfortable cutting rates when we're comfortable cutting rates, and that won't be this year." Fed Chair Jerome Powell acknowledged the positive development of reduced inflation from last year's highs. However, as the central bank navigates a challenging phase in its fight against inflation, it faces the delicate task of balancing the need for future rate hikes against the risks of going too far, potentially resulting in economic losses. WATCH WION LIVE HERE

Federal Reserve raises rates, Powell hints at another hike in September

The International Monetary Fund (IMF) has encouraged India to remove restrictions on export of non-basmati rice, saying that the country’s decision would put additional pressure global inflation.

The Indian government had banned the export of non-basmati white rice on July 20, in order to enhance domestic supply and stabilise local retail prices during the approaching festive season. The export policy was amended from ‘Free with export duty of 20%’ to ‘Prohibited’ immediately.

IMF’s chief economist, Pierre-Oliver Gourinchas, said in a press conference that given the environment, restriction in the export of rice would increase food prices globally. This could also lead to counter measures.

"So, they are certainly something that we would encourage the removal of these types of export restrictions, because they can be harmful globally,” PTI quoted Gourinchas as saying.

In a statement, India’s food ministry had said that no changes would be made in the export policy of par-boiled and basmati rice, which constitutes a major chunk of rice exports from the country.

Total exports of non- basmati rice from India in financial year 2022-23 was $4.2 million in comparison to $2.62 million last year. Non-basmati white rice accounts for about 25 per cent of the total rice exported from India, with major exports to the US, Thailand, Italy, Spain and Sri Lanka.

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The International Monetary Fund (IMF) has encouraged India to remove restrictions on export of non-basmati rice, saying that the country’s decision would put additional pressure global inflation.

The International Monetary Fund (IMF) has encouraged India to remove restrictions on export of non-basmati rice, saying that the country’s decision would put additional pressure global inflation. The Indian government had banned the export of non-basmati white rice on July 20, in order to enhance domestic supply and stabilise local retail prices during the approaching festive season. The export policy was amended from ‘Free with export duty of 20%’ to ‘Prohibited’ immediately. IMF’s chief economist, Pierre-Oliver Gourinchas, said in a press conference that given the environment, restriction in the export of rice would increase food prices globally. This could also lead to counter measures. "So, they are certainly something that we would encourage the removal of these types of export restrictions, because they can be harmful globally,” PTI quoted Gourinchas as saying. In a statement, India’s food ministry had said that no changes would be made in the export policy of par-boiled and basmati rice, which constitutes a major chunk of rice exports from the country. Total exports of non- basmati rice from India in financial year 2022-23 was $4.2 million in comparison to $2.62 million last year. Non-basmati white rice accounts for about 25 per cent of the total rice exported from India, with major exports to the US, Thailand, Italy, Spain and Sri Lanka. WATCH WION LIVE HERE

IMF urges India to remove restrictions on rice exports over global inflation concerns

The Bank of England is set to incur a loss of more than $193 billion from the sale of bonds - this is due to the high interest rates. Reports now suggest that the payment will be paid by the treasury out of the current spending.

UK: High interest rates to force Bank of England to make a loss of $193 billion

In a closely watched move, the Federal Reserve is poised to raise interest rates by 0.25 percent this week. This anticipated hike would mark the central bank's 11th rate increase in just 18 months, setting the stage for a significant monetary shift.

The Federal Reserve's two-day policy meeting will commence today, with the monetary policy decision slated to be announced on Wednesday. Market participants, investors, and analysts are on high alert as they await further insights into the central bank's strategy and projections, which could have significant implications for the global financial landscape.

This week's decision, unlike the June announcement, will not see central bank officials accompany it with revised economic estimates. Notably, last month's predictions indicated that two additional rate increases would be necessary in 2023 to align with the Fed's target of two&nbsp;percent.

Federal Reserve Chair Jay Powell is expected to address the public with a crucial announcement that is garnering significant attention from Wall Street. It is widely anticipated that Powell will leave the door open for further rate increases later this year, citing concerns about inflation and lending conditions.

With mounting inflationary pressures and economic uncertainties, Powell's address is highly anticipated, as it may set the course for the Federal Reserve's monetary policy in the coming months. Wall Street and investors alike await insights into the central bank's strategies and outlook, as they prepare for potential impacts on financial markets and lending conditions.

Traders have been closely monitoring the situation, with a 99.8 percent chance already placed on the Fed's announcement of a 0.25 percent rate hike. The decision comes as consumer prices inched up at the slowest rate since March 2021, with headline CPI reaching three&nbsp;percent. However, inflation surged 4.8 percent year on year on a "core' basis, which excludes food and gas expenses. This level of inflation exceeds the Fed's target of 2 percent, adding to the complexity of the central bank's decision-making process.

The Federal Reserve's anticipated&nbsp;rate hike has prompted discussions among officials and economists. Fed governor Chris Waller and Dallas Fed president Lorie Logan have both reaffirmed their forecast that this rate move is the first step of a two-phase process aimed at tackling inflation and achieving a soft landing for the economy. However, not everyone shares this view. Some Wall Street economists believe that this week's rate hike may mark the conclusion of the central bank's aggressive tightening cycle, as inflation data shows signs of easing.

With lingering inflation concerns, the financial world eagerly awaits the implications of the Fed's decision. The impact on the economy, Wall Street, and Main Street is substantial, leading experts to diverge on the appropriate course of action. The central bank's delicate balancing act, seeking to address inflationary pressures while maintaining economic growth, leaves the question of whether this rate hike is merely the beginning or the end of a monetary symphony.

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In a closely watched move, the Federal Reserve is poised to raise interest rates by 0.25 percent this week. This anticipated hike would mark the central bank's 11th rate increase in just 18 months, setting the stage for a significant monetary shift.

In a closely watched move, the Federal Reserve is poised to raise interest rates by 0.25 percent this week. This anticipated hike would mark the central bank's 11th rate increase in just 18 months, setting the stage for a significant monetary shift. The Federal Reserve's two-day policy meeting will commence today, with the monetary policy decision slated to be announced on Wednesday. Market participants, investors, and analysts are on high alert as they await further insights into the central bank's strategy and projections, which could have significant implications for the global financial landscape. This week's decision, unlike the June announcement, will not see central bank officials accompany it with revised economic estimates. Notably, last month's predictions indicated that two additional rate increases would be necessary in 2023 to align with the Fed's target of two percent. Federal Reserve Chair Jay Powell is expected to address the public with a crucial announcement that is garnering significant attention from Wall Street. It is widely anticipated that Powell will leave the door open for further rate increases later this year, citing concerns about inflation and lending conditions. With mounting inflationary pressures and economic uncertainties, Powell's address is highly anticipated, as it may set the course for the Federal Reserve's monetary policy in the coming months. Wall Street and investors alike await insights into the central bank's strategies and outlook, as they prepare for potential impacts on financial markets and lending conditions. Traders have been closely monitoring the situation, with a 99.8 percent chance already placed on the Fed's announcement of a 0.25 percent rate hike. The decision comes as consumer prices inched up at the slowest rate since March 2021, with headline CPI reaching three percent. However, inflation surged 4.8 percent year on year on a "core' basis, which excludes food and gas expenses. This level of inflation exceeds the Fed's target of 2 percent, adding to the complexity of the central bank's decision-making process. The Federal Reserve's anticipated rate hike has prompted discussions among officials and economists. Fed governor Chris Waller and Dallas Fed president Lorie Logan have both reaffirmed their forecast that this rate move is the first step of a two-phase process aimed at tackling inflation and achieving a soft landing for the economy. However, not everyone shares this view. Some Wall Street economists believe that this week's rate hike may mark the conclusion of the central bank's aggressive tightening cycle, as inflation data shows signs of easing. With lingering inflation concerns, the financial world eagerly awaits the implications of the Fed's decision. The impact on the economy, Wall Street, and Main Street is substantial, leading experts to diverge on the appropriate course of action. The central bank's delicate balancing act, seeking to address inflationary pressures while maintaining economic growth, leaves the question of whether this rate hike is merely the beginning or the end of a monetary symphony. WATCH WION LIVE HERE

Federal Reserve likely to resume rate hikes following June pause

The International Monetary Fund (IMF), on Tuesday (July 25) slightly raised the outlook for global growth this year given the resilient economy, particularly, service sector activity in the first quarter of 2023. However, the global lender also warned about the persistent challenges which are dampening the medium-term outlook. Meanwhile, India’s projection of economic growth is at 6.1 per cent in this year.&nbsp;

<h2>IMF about the growth forecast</h2>

In its latest, World Economic Outlook (WEO), the IMF projected global real GDP growth of 3.0 per cent for this year, which is 0.2 percentage points higher than its April forecast. But the global growth is expected to stay there and the forecast for 2024 remained unchanged at 3.0 per cent, amid weak growth among the world’s advanced economies.&nbsp;

The growth forecast was slightly raised as the IMF noted ease in soaring inflation as well as the acute stress that the banking sector witnessed. “We’re not out of the woods yet and growth remains on the low side,” IMF Chief Economist Pierre-Olivier Gourinchas told AFP, in an interview.&nbsp;

“What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID,” the IMF chief economist told Reuters.&nbsp;

The global economic growth is nearly half of what it was in two years with 6.3 per cent and also lower than 3.5 per cent in 2022, the WEO noted. Gourinchas told Reuters how the lowered growth is also related to the ageing of the global population, particularly in countries like China, Japan, and Germany.

<h2>Lower inflation</h2>

According to the IMF, the global headline inflation may fall to 6.8 per cent this year, from 8.7 per cent in 2022 and may witness a further drop to 5.2 per cent next year. On the other hand, core inflation would decline more gradually, with 6.0 per cent in 2023 from 6.5 per cent, last year to 4.7 per cent in 2024.&nbsp;

Gourinchas told Reuters we might have to wait until the end of 2024 or early 2025 to see the drop in inflation which the central bankers have targeted and the current cycle of monetary tightening would end.

However, the IMF notes that if the war in Ukraine were to intensify, given Russia’s backing out of the Black Sea grain deal, and the world witnesses a rise in extreme weather events due to the El Nino weather pattern, it could raise the prices of commodities. This in turn could trigger further rate hikes.

The IMF has said the world is a better place than it was and also hailed the World Health Organization’s decision to end the global health emergency due to COVID-19, which has reduced shipping costs and delivery times to pre-pandemic levels.&nbsp;

<h2>‘Broadly stable’ outlook for EMDEs</h2>

In the emerging markets developing economies (EMDEs), a growth of 4.0 per cent is expected in 2023 and 4.1 per cent in 2024, while the overall outlook is “broadly stable,” said the IMF. Additionally, the WEO also noted that much of the global growth this year will be contributed by EMDEs like India and China, with substantially slow economic activity in advanced economies.&nbsp;

The report noted that China’s growth forecast for this year remained unchanged at 5.2 per cent. Meanwhile, advanced economies are expected to grow 1.5 per cent in 2023, which was raised by 0.2 percentage points from April and 1.4 percent in 2024.&nbsp;

<h2>What about India?</h2>

India’s growth is projected to be 6.1 per cent this year, which is up by 0.2 percentage points since the previous forecast in April. The report attributed this growth to “momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment.”

(With inputs from agencies)&nbsp; 
&nbsp;

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The International Monetary Fund (IMF), on Tuesday (July 25) slightly raised the outlook for global growth this year given the resilient economy, particularly, service sector activity in the first quarter of 2023.

The International Monetary Fund (IMF), on Tuesday (July 25) slightly raised the outlook for global growth this year given the resilient economy, particularly, service sector activity in the first quarter of 2023. However, the global lender also warned about the persistent challenges which are dampening the medium-term outlook. Meanwhile, India’s projection of economic growth is at 6.1 per cent in this year. IMF about the growth forecast In its latest, World Economic Outlook (WEO), the IMF projected global real GDP growth of 3.0 per cent for this year, which is 0.2 percentage points higher than its April forecast. But the global growth is expected to stay there and the forecast for 2024 remained unchanged at 3.0 per cent, amid weak growth among the world’s advanced economies. The growth forecast was slightly raised as the IMF noted ease in soaring inflation as well as the acute stress that the banking sector witnessed. “We’re not out of the woods yet and growth remains on the low side,” IMF Chief Economist Pierre-Olivier Gourinchas told AFP, in an interview. “What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID,” the IMF chief economist told Reuters. The global economic growth is nearly half of what it was in two years with 6.3 per cent and also lower than 3.5 per cent in 2022, the WEO noted. Gourinchas told Reuters how the lowered growth is also related to the ageing of the global population, particularly in countries like China, Japan, and Germany. Lower inflation According to the IMF, the global headline inflation may fall to 6.8 per cent this year, from 8.7 per cent in 2022 and may witness a further drop to 5.2 per cent next year. On the other hand, core inflation would decline more gradually, with 6.0 per cent in 2023 from 6.5 per cent, last year to 4.7 per cent in 2024. Gourinchas told Reuters we might have to wait until the end of 2024 or early 2025 to see the drop in inflation which the central bankers have targeted and the current cycle of monetary tightening would end. However, the IMF notes that if the war in Ukraine were to intensify, given Russia’s backing out of the Black Sea grain deal, and the world witnesses a rise in extreme weather events due to the El Nino weather pattern, it could raise the prices of commodities. This in turn could trigger further rate hikes. The IMF has said the world is a better place than it was and also hailed the World Health Organization’s decision to end the global health emergency due to COVID-19, which has reduced shipping costs and delivery times to pre-pandemic levels. ‘Broadly stable’ outlook for EMDEs In the emerging markets developing economies (EMDEs), a growth of 4.0 per cent is expected in 2023 and 4.1 per cent in 2024, while the overall outlook is “broadly stable,” said the IMF. Additionally, the WEO also noted that much of the global growth this year will be contributed by EMDEs like India and China, with substantially slow economic activity in advanced economies. The report noted that China’s growth forecast for this year remained unchanged at 5.2 per cent. Meanwhile, advanced economies are expected to grow 1.5 per cent in 2023, which was raised by 0.2 percentage points from April and 1.4 percent in 2024. What about India? India’s growth is projected to be 6.1 per cent this year, which is up by 0.2 percentage points since the previous forecast in April. The report attributed this growth to “momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment.” (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

IMF raises 2023 global economic growth forecast to 3 per cent; India remains bright spot

A lower annual inflation rate in June eased Britain's cost-of-living crisis, according to official data released Wednesday. UK PM Rishi Sunak plans to reduce inflation to 5% by 2023 end.

UK's annual inflation drops below 8%

Pakistan's ruling alliance have agreed to dissolve the incumbent national assembly 4 days before it is slated to expire by august 12 midnight. The move calls for fresh elections to be held within 90 days of the dissolution.

Pakistan: National assembly dissolution finalised

Over the last year, the jump in interest rates has wiped off more than two trillion dollars of household wealth in Britain right and this is due to a fall in house prices.

UK: Biggest wealth drop in decades | Latest World News

Inflation in the US has reached a&nbsp;two-year low, indicating positive momentum in the fight against rising prices. The latest data from the Labor Department on Wednesday also revealed that underlying consumer prices experienced their slowest monthly growth since August 2021.

The Consumer Price Index (CPI) recorded a 3 percent increase in the year leading up to June. This represents the weakest year-on-year increase since March 2021, following a 4.0 percent increase in May. Although this decline in&nbsp;inflation&nbsp;is a positive development, it is important to note that it does not necessarily indicate the end of the battle against price pressures. Last year's peak, the highest seen in four decades, underscores the ongoing need to address and manage inflationary pressures.

This substantial decrease in underlying inflation sparked a rally in the stock and bond markets, with investors gaining confidence that the United States' central bank is nearing the conclusion of its rapid monetary policy tightening cycle, the quickest since the 1980s.

However, this deceleration in inflation may not be enough to dissuade the Federal Reserve from proceeding with another interest rate hike this month.

The Federal Reserve, expected to proceed with another interest rate increase later this month, confronts challenges as it navigates the complexities of the current economic landscape. Market reactions have been noteworthy, with short-term Treasury yields experiencing a significant decline while stocks rose.

While the recent decline in inflation rates is undoubtedly encouraging, it is crucial to acknowledge that inflation still remains well above the Federal Reserve's target of 2 percent, particularly given the tight labor market conditions.

Reuters cited Christopher Rupkey, the chief economist at FWDBONDS in New York, as saying&nbsp;that inflation is not completely eliminated, but the unprecedented impact of the pandemic on prices, caused by shortages and the shift towards stay-at-home purchases, has evidently subsided. As a result, the Federal Reserve now finds itself in a position of strength in its battle against inflation for the first time.

The final stage of curbing inflation is expected to pose significant challenges, particularly due to concerns regarding the comparison of the current consumer price index to the previous year's index. This previous period witnessed a notable increase in energy prices driven by geopolitical events, which could artificially mask the extent of the current slowdown.

Inflation in the US has reached a two-year low, indicating positive momentum in the fight against rising prices. The latest data from the Labor Department on Wednesday also revealed that underlying consumer prices experienced their slowest monthly growth since August 2021.

Inflation in the US has reached a two-year low, indicating positive momentum in the fight against rising prices. The latest data from the Labor Department on Wednesday also revealed that underlying consumer prices experienced their slowest monthly growth since August 2021. The Consumer Price Index (CPI) recorded a 3 percent increase in the year leading up to June. This represents the weakest year-on-year increase since March 2021, following a 4.0 percent increase in May. Although this decline in inflation is a positive development, it is important to note that it does not necessarily indicate the end of the battle against price pressures. Last year's peak, the highest seen in four decades, underscores the ongoing need to address and manage inflationary pressures. This substantial decrease in underlying inflation sparked a rally in the stock and bond markets, with investors gaining confidence that the United States' central bank is nearing the conclusion of its rapid monetary policy tightening cycle, the quickest since the 1980s. However, this deceleration in inflation may not be enough to dissuade the Federal Reserve from proceeding with another interest rate hike this month. The Federal Reserve, expected to proceed with another interest rate increase later this month, confronts challenges as it navigates the complexities of the current economic landscape. Market reactions have been noteworthy, with short-term Treasury yields experiencing a significant decline while stocks rose. While the recent decline in inflation rates is undoubtedly encouraging, it is crucial to acknowledge that inflation still remains well above the Federal Reserve's target of 2 percent, particularly given the tight labor market conditions. Reuters cited Christopher Rupkey, the chief economist at FWDBONDS in New York, as saying that inflation is not completely eliminated, but the unprecedented impact of the pandemic on prices, caused by shortages and the shift towards stay-at-home purchases, has evidently subsided. As a result, the Federal Reserve now finds itself in a position of strength in its battle against inflation for the first time. The final stage of curbing inflation is expected to pose significant challenges, particularly due to concerns regarding the comparison of the current consumer price index to the previous year's index. This previous period witnessed a notable increase in energy prices driven by geopolitical events, which could artificially mask the extent of the current slowdown.

United States: June inflation at 3%, lowest rate in two years

Food prices, constituting almost half of the inflation index, have climbed steeply, contributing to the overall increase. Alongside this, clothing and footwear prices have seen a substantial jump, further exacerbating the situation. With housing costs also on the rise, the inflationary pressure is mounting.

India’s retail inflation hits 4.81% | World Business Watch

In the battle against rising prices, the US inflation rate takes a significant dip hitting a more than two-year low.

US inflation in slow motion, inflation rate hits 2-year low

US: Inflation remains above federal reserve's 2% target

Despite India's impressive economic growth numbers and being the world's sweet spot, the country's citizens continue to struggle with rising unemployment.

Greed inflation: surging profits, shrinking wallets

Doctors in the UK are set to stage the biggest walkout in the history of state-funded National Health Service. This comes against the backdrop of the UK's crippling cost of the living crisis which has prompted industrial walkouts across various sectors.

UK doctors to stage walkout, soaring inflation making situation worse | World News | WION

As the IMF agreed a three billion dollar deal to avert an impending economic catastrophe in the area, Pakistan has gained a much-needed lifeline. This IMF investment is a ray of hope for Pakistan's beleaguered economy, which has been suffering from a severe balance of payments problem and declining foreign reserves that have brought it perilously near to default. Pakistan's prime minister expressed gratitude to China and other friends for their assistance.

IMF to disburse $ 3 Billion to Pakistan in nine months

Turkey's official inflation rates continue to drop after they peaked at 85% late last year. Figures reported in June were lower than projections. Economists emphasise hope for the country as Erdogan takes a conventional policy route. Will the trend continue or will the president return to his old ways? Ghadi Francis gets you the story.

Lira steadily deteriorates, as Turkish inflation rates cool | What comes next?

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