What are the stories behind the interest rate announcements this week?
With the fear of rising inflation having been replaced by the reality of economic stagnation across North America, Europe and certain parts of Asia we take look at the economies of the five different economic zones who announced their latest interest rates this week.
Australia’s commodity-dependent economy is back in growth with the recent stronger-than-expected GDP figure helping to boost investor sentiment there; second quarter GDP rose 1.2 after a flood-affected first quarter contraction of -0.9%.
Unemployment is rising though, up 5.3% in August from 5.1% in July and the mood among consumers is a pessimistic one; the Australian Consumer Confidence index dropped below 100 for the first time in two years down to 97 points in August.
The Reserve Bank of Australia (RBA) kept interest rates on hold at 4.75% as expected. ‘There are any number of hurdles in Europe or the United States that could serve as a catalyst for increased anxiety,’ said the RBA’s governor Glenn Stevens.
GDP in the UK grew by 0.2% in the second quarter, down from 0.5% in the first quarter with the Office for National Statistics citing a number of one-off factors that had slowed growth including the disruption to supply chains caused by the tsunami.
Unemployment in the UK is up to 7.9% in the second quarter from 7.7% previously. Consumer confidence fell to -31 in August from -30 in July according to GfK NOP social research – a four-month low.
The Bank of England kept the UK’s interest rate at 0.5% as expected. ‘Were they to crystallise, the risks emanating from the euro area have the potential to have a significant impact on the UK economy,’ said the Bank of England governor Mervyn King in August.
Canada’s GDP contracted in the second quarter to -0.1% from the first quarter – it’s first contraction in two years. Exports were down 2.1% and energy shipments fell 6.7%.
As of July, unemployment in Canada stands at 7.2% which is down from 7.4% in June. According to the Conference Board of Canada’s index, consumer confidence dropped 6.6 points to 74.7 in August – its lowest point in two years
The Bank of Canada chose to keep interest rates unchanged at 1%; ‘In the light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,’ read the policy.
Japan’s GDP dropped less-than-expected by 0.3% in the second quarter – its third consecutive quarter of decline. The strength of the yen is still hampering its all-important exports and the recovery from the earthquake disaster.
The unemployment rate in Japan ticked up to 4.7% in July from 4.6% previously. Japan’s Consumer Confidence index ticked up in July to 37.7 from 36.2 in June; it had fallen significantly in the aftermath of the earthquake.
The policy board of the Bank of Japan maintained its interest rate at between 0% and 0.1% while keeping the tone of its statement optimistic, ‘Japan’s economic activity has been picking up steadily while the supply-side constraints caused by the earthquake disaster have been mostly resolved,’.
According to Eurostat GDP in the eurozone expanded by 0.2% in the second quarter compared with a 0.8% increase in the first. Germany’s GDP expanded by only 0.1%, France recorded zero growth, while Spain and Italy recorded 0.2% and 0.3% respectively.
The unemployment rate in the eurozone now stands at 10% with the lowest rate being in Austria (3.7%) and the highest in Spain (21.2%). Meanwhile, according to the European Commission’s economic sentiment index, consumer confidence across the eurozone dropped to 98.3 in July compared with 103 in July. Germany, Europe’s largest economy, recorded the biggest fall from 112.7 to 107.
There was no doubt which interest rate decision was most keenly anticipated during the week though. Before the announcement, analysts had been speculating that the European Central Bank (ECB) might be contemplating lowering its interest rates to try and spur growth. It didn’t materialise.
Keeping the rate at 1.5% ECB president Jean-Claude Trichet said that ‘There is an enormous degree of uncertainty surrounding the global economy and the eurozone economy,’ and that ‘We expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks.’
Source: www.marketmoves.com
With the fear of rising inflation having been replaced by the reality of economic stagnation across North America, Europe and certain parts of Asia we take look at the economies of the five different economic zones who announced their latest interest rates this week.
Australia’s commodity-dependent economy is back in growth with the recent stronger-than-expected GDP figure helping to boost investor sentiment there; second quarter GDP rose 1.2 after a flood-affected first quarter contraction of -0.9%.
Unemployment is rising though, up 5.3% in August from 5.1% in July and the mood among consumers is a pessimistic one; the Australian Consumer Confidence index dropped below 100 for the first time in two years down to 97 points in August.
The Reserve Bank of Australia (RBA) kept interest rates on hold at 4.75% as expected. ‘There are any number of hurdles in Europe or the United States that could serve as a catalyst for increased anxiety,’ said the RBA’s governor Glenn Stevens.
GDP in the UK grew by 0.2% in the second quarter, down from 0.5% in the first quarter with the Office for National Statistics citing a number of one-off factors that had slowed growth including the disruption to supply chains caused by the tsunami.
Unemployment in the UK is up to 7.9% in the second quarter from 7.7% previously. Consumer confidence fell to -31 in August from -30 in July according to GfK NOP social research – a four-month low.
The Bank of England kept the UK’s interest rate at 0.5% as expected. ‘Were they to crystallise, the risks emanating from the euro area have the potential to have a significant impact on the UK economy,’ said the Bank of England governor Mervyn King in August.
Canada’s GDP contracted in the second quarter to -0.1% from the first quarter – it’s first contraction in two years. Exports were down 2.1% and energy shipments fell 6.7%.
As of July, unemployment in Canada stands at 7.2% which is down from 7.4% in June. According to the Conference Board of Canada’s index, consumer confidence dropped 6.6 points to 74.7 in August – its lowest point in two years
The Bank of Canada chose to keep interest rates unchanged at 1%; ‘In the light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,’ read the policy.
Japan’s GDP dropped less-than-expected by 0.3% in the second quarter – its third consecutive quarter of decline. The strength of the yen is still hampering its all-important exports and the recovery from the earthquake disaster.
The unemployment rate in Japan ticked up to 4.7% in July from 4.6% previously. Japan’s Consumer Confidence index ticked up in July to 37.7 from 36.2 in June; it had fallen significantly in the aftermath of the earthquake.
The policy board of the Bank of Japan maintained its interest rate at between 0% and 0.1% while keeping the tone of its statement optimistic, ‘Japan’s economic activity has been picking up steadily while the supply-side constraints caused by the earthquake disaster have been mostly resolved,’.
According to Eurostat GDP in the eurozone expanded by 0.2% in the second quarter compared with a 0.8% increase in the first. Germany’s GDP expanded by only 0.1%, France recorded zero growth, while Spain and Italy recorded 0.2% and 0.3% respectively.
The unemployment rate in the eurozone now stands at 10% with the lowest rate being in Austria (3.7%) and the highest in Spain (21.2%). Meanwhile, according to the European Commission’s economic sentiment index, consumer confidence across the eurozone dropped to 98.3 in July compared with 103 in July. Germany, Europe’s largest economy, recorded the biggest fall from 112.7 to 107.
There was no doubt which interest rate decision was most keenly anticipated during the week though. Before the announcement, analysts had been speculating that the European Central Bank (ECB) might be contemplating lowering its interest rates to try and spur growth. It didn’t materialise.
Keeping the rate at 1.5% ECB president Jean-Claude Trichet said that ‘There is an enormous degree of uncertainty surrounding the global economy and the eurozone economy,’ and that ‘We expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks.’
Source: www.marketmoves.com
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