Fed and BoE raise interest rates. The Federal Reserve (Fed) on Wednesday raised its key interest rate by three-quarters of a percentage point and forecast it will go even higher to combat inflation. However, the central bank signalled it may be nearing a turning point in rate increases in what has become the steepest tightening in the US since the early 1980s. Close on the heels of the Fed’s move, the Bank of England on Thursday also raised interest rates by three quarters of a percentage point to three percent - the biggest hike in over 30 years. It also forecasts that the UK is facing a “very challenging” two-year recession - which would be the longest on record. Through these measures, the central banks are trying to bring multi-decade high inflation rates in their home countries under control.
Eurozone inflation hits record high of 10.7 percent. A surprising jump in consumer prices in the eurozone indicates that inflation dug itself deeper across the currency bloc despite slowing growth. Eurozone headline and core inflation surprised remarkably on the upside, rising to new all-time highs of 10.7 percent and five percent year-on-year respectively in October, flash data from Eurostat showed on Monday. Headline inflation rose from 9.9 percent, above the consensus estimate of 10.3 percent. Core inflation rose from 4.8 percent to five percent year-on-year, in line with consensus. The European Central bank, with a mandate to keep inflation in the eurozone close to two percent, over the summer, reversed the decade long trend of negative interest rates in a bid to curb price increases.
UK mortgage approvals fall sharply in September. Bank of England data suggests that the number of mortgage approvals made to home-buyers fell significantly in September, as a result of increased borrower costs. Mortgage approvals for house purchases fell to 66,800 from 74,400 the prior month - on the heels of rising interest rates targeting multi-decade high inflation and the start of the negative effects of the mini-budget, according to analysts. "September's money and credit figures point to further signs that consumers have become more cautious in response to the weakening economic outlook," said Ashley Webb, UK economist at consultancy Capital Economics.
China’s factory activity contracts in October as coronavirus curbs weigh on economy. China’s factory activity, a leading indicator to overall performance, fell in October due to frequent Covid lockdowns, the National Bureau of Statistics (NBS) said on Monday. The NBS Manufacturing Purchasing Managers Index (PMI) fell to 49.2 in October from 50.1 the prior month, below the 50 level that separates expansion from contraction, amid Covid-19 restrictions in several Chinese cities. “The official PMIs point to a further loss of momentum in this month as virus disruptions worsened and export orders remained under pressure,” said Zichun Huang, China economist at Capital Economics.
RBA raises cash rate by 0.25 per cent. Australia’s central bank lifted interest rates by a quarter-percentage point on Tuesday and signalled further increases as it battles rising inflation. The Reserve Bank of Australia has hiked the official interest rate by 0.25 percentage points, the seventh straight rise in a steep tightening cycle aimed at bringing inflation under control. The increase was in line with expectations and means the overnight cash rate has jumped from 0.1 percent to 2.85 percent since early May, the fastest tightening cycle in almost 30 years. Today's hike means the average Australian with a $500,000 mortgage would be forking out around $74 more a month, after having seen their mortgage repayments rise by a monthly total of $760 since the start of this interest hike cycle in May 2022.
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