The world's major central banks must not let up in the fight against inflation because it is still too early to tell whether sharp interest rate hikes have curbed underlying price pressures
The Organization for Economic Co-operation and Development (OECD) expects global inflation to fall faster in most economies compared to its previous estimates, but urged central bankers to remain vigilant as it is still too early to predict to declare victory.
Deflation is worsening in China, while annual revisions confirmed that inflation in the US is on a downward trend. However, price pressures in Brazil did not ease as much as forecast at the beginning of the year, while wage growth in Japan continued to gain momentum.
The world's major central banks must not let up in the fight against inflation as it is still too early to say whether sharp interest rate hikes have curbed underlying price pressures, the OECD said.
Observation of central banks
Australia's central bank left interest rates at a 12-year high and signaled further tightening remained possible. India kept interest rates stable but maintained its restrictive policy stance. Thailand, Iceland, Serbia, Uganda, Poland and Mexico also left interest rates unchanged. Kenya raised interest rates more than expected and Nigeria raised interest rates on short-term debt. The Czech Republic and Peru cut interest rates.
More ships are traveling in Africa
Major shipping companies are warning that the security situation in the Red Sea continues to deteriorate despite Western efforts to contain attacks by Houthi rebels in Yemen. Shipping companies' risk perception is important because it determines when ships return to the region. All owners said they would continue to divert their vessels until it was safe to sail through the Red Sea.
Asia
China's consumer prices fell 0.8% last month, the most since the global financial crisis, increasing pressure on the government to step up support for a faltering economic recovery that has roiled markets. The producer price index fell 2.5%, marking 16 consecutive months of deflation in factory gate costs.
Japan's annual wage negotiations have begun in earnest, drawing increased attention as the Bank of Japan seeks evidence of a positive wage-price cycle that would allow it to exit the world's last negative interest rate regime. Data released on Tuesday showed that wage growth rose less than expected in December, but still showed signs of enough underlying momentum to keep the BOJ on track.
US
U.S. inflation at the end of last year was about the same level as originally reported, taking annual revisions into account, according to new data released Friday. The uneventful revision will come as a relief to Federal Reserve officials, who are looking for more evidence that price pressures are easing sustainably before they begin cutting interest rates.
The U.S. trade deficit narrowed last year by the most since 2009 as the value of imported goods fell and the services surplus increased. The country's goods deficit with China shrank 27% last year to an unadjusted $279.4 billion, its lowest level since 2010.
American households took on more debt late last year, and some of those loans are increasingly defaulting, according to data from the Federal Reserve Bank of New York. Although overall delinquency rates in the U.S. remain below pre-COVID levels, those for credit cards and auto loans are now higher.
Emerging markets
Brazil's annual inflation rate slowed less than expected at the start of the year, highlighting the challenges the central bank faces in reducing borrowing costs.
Europe
German industrial production extended its slump in December to a seventh month, underscoring the difficulties gripping Europe's largest economy. Overall production levels are now at their lowest level since June 2020 and, ignoring the shock of the pandemic, the last time they were this weak was in 2010.
Britain's labor market is tighter than expected, reflecting changes in population estimates in official data that showed more young people of working age than before. According to the new measure, the unemployment rate was 3.9% in the three months to November, well below the 4.2% estimated using previous data, the Office for National Statistics said.
An expert survey found that European economies were at increased risk of recession due to geopolitical conflicts and increased energy costs. In the Eurozone, the likelihood of production falling for two quarters in a row by the end of the year is highest in Germany and the Netherlands.
Disclaimer: This article first appeared on Bloomberg and is published under a special syndication agreement.
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