Eurozone Inflation Touches Record High, US Treasury, What To Watch At BoE Rate Setting Meeting
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Summary:
- Consumer prices in the Eurozone reached a new record high.
- Investors in US government bonds are pleading with the Treasury department to intervene.
- The BoE will this week publish its latest decision on interest rates.
Eurozone inflation rises for 12th consecutive month
According to a flash estimate from the European Union's statistics office, consumer prices in the Eurozone reached a new record high for the twelfth consecutive month, driven by a persistent rise in energy prices. In October, annual inflation in the currency region increased by 10.7%, exceeding economists' expectations of 10.2% and up from the previous level of 9.9%.
As a result of ongoing tensions regarding the provision of crucial Russian gas flows into Europe after the start of the war in Ukraine, energy costs increased by 41.9% during the month. Food, drink, and tobacco prices all went up 13.1%. Core inflation, which excludes volatile commodities like food and energy, registered at 5.0%, up from the previous reading of 4.8% and also higher than expected. Businesses have displayed symptoms of pessimism about the future, and economists anticipate that the Eurozone will enter a recession this year as a result of spillover effects from this skyrocketing inflation.
According to Eurostat's flash statistics, which was also issued on Monday, the third quarter saw an unusually severe slowdown in economic development in the Eurozone. The seasonally adjusted gross domestic product increased by 0.2% when compared to the prior three months, which was less than the 0.8% increase seen in the second quarter and the 1.0% increase expected. In morning trade, the euro decline against the dollar and little changed thereafter.
âš ï¸BREAKING:
— Investing.com (@Investingcom) October 31, 2022
*EURO ZONE ANNUAL INFLATION RATE JUMPS TO 10.7% IN OCTOBER, HIGHEST LEVEL ON RECORD
🇪🇺🇩🇪🇫🇷🇮🇹🇪🇸🇳🇱 pic.twitter.com/3qj1Ddy4dr
Investors pleading with US Treasury department
Investors in US government bonds are pleading with the Treasury department to intervene in the market in the hopes that this week will bring signs of potential buybacks following months of erratic price fluctuations and little liquidity.
The fast rate hikes and quantitative tightening program implemented by the Federal Reserve this year have heightened the tension in the typically subdued $24 trillion Treasury market. When the Treasury announces its funding for the fourth quarter in the coming days, investors are hoping for hints about what it has in store.
The cost of borrowing for the US government and the benchmark for prices across asset classes are determined by Treasury rates, which have fluctuated drastically in 2022. Even though the Treasury bond market is supposedly the most liquid in the world, the volatility has made it more difficult and expensive for investors to buy or sell Treasury bonds.Investors, strategists, and primary dealers anticipate that the Treasury will provide some information in the documents it releases this week after reviewing the survey's findings with them last week. The expected financing requirements for the fourth quarter and the Treasury's intentions for issuance will be revealed on Monday.
Investors urge US Treasury to boost bond market liquidity with buyback scheme https://t.co/xlPeGVvvK2
— Financial Times (@FT) October 31, 2022
BoE to make UK economy estimates and interest rate decision
The Bank of England will this week publish its latest decision on interest rates along with updated estimates for the UK economy in what is the most anxiously awaited monetary policy meeting in years.
One of the most volatile periods in recent UK economic history preceded the BoE's most recent interest rate meeting on September 22. Liz Truss' "mini" Budget, which included £45 billion in unfunded tax cuts, caused a spike in government borrowing costs, necessitated an emergency BoE intervention, and increased mortgage rates for homeowners.
In the government's autumn statement on November 17, the new prime minister Rishi Sunak promises a new economic plan that will demonstrate how debt would decrease as a share of gross domestic product over the medium term.
Thus, without complete knowledge of Sunak's strategy, the BoE Monetary Policy Committee will be largely "flying blind" when it announces its interest rate decision on Thursday. Four things to watch out for are listed below.
- Interest rate decision.
- Economic growth and inflation forecasts.
- Quantitative tightening.
- Monetary policy management expectations.
Four things to watch at the Bank of England’s rate-setting meeting https://t.co/u2hMRgYqu7
— Financial Times (@FT) October 31, 2022
Sources: ft.com, twitter.com, investing.com
