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In our Market insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Turkey’s inflation rate cools despite drastic lira decline
Turkey’s monthly inflation rate for June came in lower than expected, despite the continued collapse of the lira currency following the re-election of President Recep Tayyip Erdogan.
Turkey’s consumer price index rose 3.92% month-on-month, the latest official data showed. The reading was lower than Reuters’ forecast of 4.84% and compares against a 0.04% increase in the month of May.
The largest gains were attributed to rises in tobacco and alcoholic beverage prices, which jumped 11.13%, while restaurant and hotel prices inched up 4.31%.
On a year-on-year basis, inflation rose 38.21%, also slightly lower than Reuters’ forecasts of 39.47%.
While June was the eighth consecutive month of price growth deceleration, the latest statements from market analysts still hint at a bleaker output with little room for optimism.
Last October saw Turkey’s inflation rate soar to 85%. The Turkish lira was last trading at a rate of 26.09 against the dollar.
Last month, the central bank lifted the country’s key interest rate from 8.5% to 15%, and affirmed that there will be further gradual monetary tightening until the inflation situation in the country improves.
Turkey’s latest introduction of a minimum wage hike, as well as a potential overhaul of tax rates which were postponed due to the elections are tipped to contribute to the return of the annual inflation rate toward the 50% mark in the second part of 2023, with the latest data provided by forecasters.
US economy stronger than reported at the start of 2023
US economic growth was stronger than previously reported at the start of the year - news that could help bolster the case for higher interest rates in the world's largest economy.
The Commerce Department said the latest data showed the US economy grew at an annual rate of 2% in the first three months of the year.
Its first estimate put growth at 1.1% in the January to March period. The boost reflected stronger consumer spending than previously understood. The US central bank has been trying to cool the economy, aiming to ease the pressures pushing up prices.
It has raised its key interest rate by five percentage points since March 2022, to more than 5%, and signalled that more hikes are in the offing.
The moves had raised concerns that they might lead to a painful slowdown, as higher rates weigh on activity, such as spending and business expansions.
Many companies had reported concerns about the outlook earlier this year, but hiring has remained strong and other data has painted a brighter picture.
Analysts said the report did not shift the overall picture of inflation. Consumer prices in the US rose 4% over the 12 months to May, according to the Labor Department. That was the slowest pace in two years, reflecting declines in costs for fuel since last year's spike.
But prices of many other items have continued to rise. So-called core inflation, which strips out energy and food items and economists say is a better measure of underlying pressures, was 5.3%.
The economy remains admirably resilient, and odds of a recession beginning this year are receding, but the path ahead is far from clear in the eyes of many economists across the country.
Australia’s central bank leaves its key rate unchanged, after inflation peaks
Australia’s central bank held its official cash rate steady at 4.10% in a closely watched decision as it states ‘inflation has peaked’ with the latest official government data.
Economists were split on expectations ahead of the decision, with 16 out of 31 respondents surveyed by Reuters forecasting a hike of 25 basis points and 15 expecting the central bank to hold at the existing rate.
Stock markets welcomed the move as the central bank said inflation in the economy has passed its peak.
The S&P/ASX 200 pared earlier losses and rose 0.5%. The Australian dollar was weakened by 0.25% to 0.6652 against the U.S. dollar.
The Australia Bureau of Statistics’ monthly inflation indicator showed some cooling in the rise of prices at 5.6% for the month of May, led by housing prices, food and non-alcoholic beverages.
Australia’s monthly inflation indicator peaked at 8.4% in December. The economy’s consumer price index rose 7% in the first quarter of 2023.
The decision comes after the central bank raised its cash rate by 25 basis points last month.
