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  • Week

Last week in a nutshell

  • Following the latest inflation estimate (8.1%), the European Central Bank stated it would raise its key interest rates by 25bps next month, with further increases planned for later this year. The bond-buying stimulus programme shall end at the end of this month.
  • US inflation surprised on the upside again in May following a slowdown in April. Transportation prices accounted for about 40% of the outsized increase while Food prices also continued to increase rapidly. Soaring early-month gasoline prices suggest another extremely strong CPI increase again next month.
  • American households are feeling increasingly uncomfortable in this environment as shown by the preliminary Consumer Sentiment estimate which hit a record low in the 5-decade old series.
  • Japan's seasonally adjusted real GDP dropped by 0.3% in April, the first contraction in three months. Exports were weaker, primarily due to China’s lockdown which slowed production and sales activities in the country. Imports declined as well, dragging down the total GDP. Private consumption held up nonetheless.

What’s next?

  • No doubt that the Federal Reserve will take note of the higher-than-expected US headline and core CPI readings for May. Another 50bps increase in its funds rate is widely expected and the updated dot plot will be scrutinised.
  • More generally, the focus will be on central banks as monetary policy decisions are also expected from the Bank of England, the Swiss National Bank and the Bank of Japan amid inflation pressures and growth concerns.
  • On the data docket, we expect retails sales and industrial production data from China. Running at a very different speed, the country is starting to lift some of its recent COVID-19 restrictions.
  • In Europe, data to be published includes April industrial production and trade balance data as well as Germany's ZEW survey for June. The UK will also reveal its April GDP growth rate after a first contraction last month.

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