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Inflation accelerated in the US and Europe last month, highlighting sticky price pressures that will keep central bankers committed to raising interest rates.
Prices in the US, according to the Federal Reserve’s preferred metrics, rose 5.4% from a year earlier and the core gauge was up 4.7%, both hotter than forecast after slowing for several months. In Europe, core price growth reached a record 5.3% — more than an initial reading of 5.2%. Headline inflation, which includes food and power, also ticked up.
Inflation is also too high in Israel and New Zealand, where officials hiked rates this week. However, there was more promising news in some emerging economies as price growth slowed in Mexico, Brazil and Malaysia.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
The Fed’s preferred inflation gauges unexpectedly accelerated in January and consumer spending surged after a year-end slump, adding pressure on policymakers to keep ratcheting up interest rates. The figures suggest that the Fed’s path to taming prices and demand will be bumpier and longer than data for late 2022 had previously indicated.
US business activity steadied in February as the service sector regained its footing, suggesting a resilient economy that is keeping some pricing power intact. While the gauge is the highest in eight months, it’s barely above the 50 level that separates growing and shrinking activity.
Underlying inflation in the euro area hit a record in January, revised data showed, likely cementing the European Central Bank’s plan to raise interest rates by another half-point next month. The report underscores the enduring effects of Europe’s worst price shock in a generation after Russia’s war in Ukraine sent energy costs soaring.
The UK granted residence visas last year at almost double the pace it did before the pandemic as more people came to work and study in the country. The figures mark a contrast with the goal of Prime Minister Rishi Sunak’s government to cut immigration sharply, one of the main things the Conservatives promised to deliver after leaving the European Union.
Mexico’s inflation decelerated more than forecast in early February, suggesting that policymakers may have some room to maneuver after they surprised analysts with a bigger-than-expected interest rate hike at their last meeting.
Brazil’s annual inflation cooled for the ninth-straight month as the central bank pledges to hold its interest rate high and eases tensions with President Luiz Inacio Lula da Silva’s economic team.
Malaysia’s headline inflation decelerated for a second month in January, supporting the central bank’s decision to pause its interest-rate tightening.
Two of Japan’s biggest automakers agreed to the biggest wage hikes in decades in an early sign of momentum in annual pay negotiations as the central bank looks for evidence of a wage-price cycle that could lead to policy change. Toyota Motor Corp. agreed to give the largest wage hikes in two decades according to its union, while Honda Motor Co. Ltd said it will boost pay by 5%.
Israel extended its longest cycle of monetary tightening in decades, and New Zealand’s central bank boosted rates by a half point. The Bank of Korea sought to keep the door open to resuming policy tightening after a pause, while Turkey surprised with a smaller cut after the country’s worst earthquake disaster in decades, signaling further monetary easing is now less likely.
–With assistance from Eamon Akil Farhat, Maya Averbuch, Andrew Langley, Reade Pickert, Andrew Rosati, Nicholas Takahashi, Kevin Varley and Zoe Schneeweiss.
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