The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
US consumer confidence improved in July as optimism about the economy and labor market outweighed concerns about current conditions.
The Conference Board’s gauge increased to 100.3 from a downwardly revised 97.8 in June, exceeding the median estimate of 99.7 from a Bloomberg survey of economists. The expectations measure for the next six months climbed to 78.2, the highest since January, with more consumers expecting better business conditions.
Key Takeaways:
- Increased Confidence: The Conference Board’s consumer confidence index rose to 100.3 in July from 97.8 in June.
- Future Optimism: Expectations for the next six months reached 78.2, the highest since January.
- Current Conditions: The gauge of present conditions fell to the lowest in over three years.
- Subdued Confidence: Despite the increase, confidence remains below pre-pandemic levels due to high living costs, elevated borrowing costs, and subdued pay growth.
- Labor Market Views: While optimism about future labor market conditions improved, views on current conditions worsened. The share of consumers saying jobs are “plentiful” fell to 34.1%, the lowest since March 2021, while more said jobs are “hard to get.”
- Labor Differential: The difference between those finding jobs plentiful and those finding jobs hard to get dropped to a more than three-year low.
- Buying Plans: Plans for purchasing new vehicles increased, while intentions to buy major appliances fell. Homebuying plans dropped to the lowest level in over 11 years, affected by high mortgage rates and prices.
Inflation Expectations and Labor Market Data:
- Inflation expectations remained steady, with recent data showing US inflation rose at a tame pace in June.
- Separate figures indicated June job openings exceeded expectations.
- A key government report due on Friday is expected to show employers added 175,000 jobs in July, indicating a slower but healthy pace of job growth.
Comments from Dana Peterson: “Confidence increased in July, but not enough to break free of the narrow range that has prevailed over the past two years,” said Dana Peterson, chief economist at the Conference Board. “Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates.”
Overall, while the consumer confidence index showed improvement, the persistence of high costs and interest rates continues to weigh on consumer sentiment and spending, especially among lower-income individuals.
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