Is there any chance the world can reverse its inflation woes?

[New Sancai Compilation and First Release] After a long period of difficulty in defeating inflation, central bank chiefs around the world are finally showing increasing confidence that the market may enter an era of low interest rates.

The Reserve Bank of New Zealand (RBNZ) said at the end of its policy meeting on July 10 that it expected headline inflation to return to its target range of 1% to 3% in the second half of this year - a decidedly less hawkish tone.

Traders immediately ramped up bets that New Zealand would cut interest rates later this year, which in turn sent the New Zealand dollar down about 0.7%.

The New Zealand Fed's decision came a day after Fed Chairman Jerome Powell told Congress that the U.S. "economy is no longer overheating" and that the job market has recovered from the extremes of the pandemic era. Cool down, although he offers few clues as to how to do this.

Still, market expectations for a more than 70% chance of a rate cut by the Federal Reserve in September are far away from the nearly unchanged likelihood a month ago, according to the CME FedWatch tool.

Powell will return to Capitol Hill later on July 10 to testify before the House Financial Services Committee, but the focus will likely be the U.S. inflation report on July 11. An unexpected surge could call into question the case for rate cuts.

Meanwhile, Japan remains an exception in the interest rate cut story, with wholesale inflation accelerating in the country in June, keeping market expectations for a near-term rate hike by the central bank active.

Sources told Reuters that the Bank of Japan may cut its economic growth forecast for this year in July, but expects inflation to remain near its 2% target in the coming years.

Interest rates aside, data on July 10 showed that China's consumer price index rose for a fifth consecutive month in June, but fell short of expectations, while producer price deflation persisted despite Beijing's support measures. Weak demand continues to plague the world's second-largest economy.

China's retailers are discounting goods from cars to coffee as they contend with sluggish consumer spending amid an uncertain economic outlook.

The pessimistic data did little to help the yuan, which fell again to its lowest level since November on July 10.

(Compiled by: Wang Jimin)

(Editor: Jiang Qiming)

(Source of the article: Compiled and published by New Sancai)