The Federal Reserve and Bank of England both left borrowing costs unchanged as they near the end of their respective tightening cycles.
While the Fed’s decision to pause was unanimous, several UK policymakers voted in favor of another another quarter-point increase. Both central banks left open the option to hike again, but a soft US jobs report at the end of the week reinforces investors’ view that the Fed’s campaign is done.
Separately, the Bank of Japan said it is easing its control of bond yields, scaling back an expensive intervention strategy that’s increasingly tested by markets, while striving to sustain the inflation it’s worked so hard to kindle.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
US
US job growth slowed by more than expected and the unemployment rate rose to an almost two-year high of 3.9%, indicating that employers’ strong demand for workers is beginning to cool. The latest figures suggest some cracks are beginning to form in a jobs market that has been gradually normalizing, thanks to an improvement in labor supply over the past year and a tempering in the pace of hiring.
Fed Chair Jerome Powell hinted the central bank may now be finished with the most aggressive tightening cycle in four decades after it held off on raising interest rates for a second consecutive policy meeting.
Even as the pandemic pushed home values up faster than ever, cheap mortgages kept buyers in the game. Now a whole new affordability crisis is beginning. And this time, there’s no obvious way out. The Fed’s policy tightening since last year has driven the interest rate on a 30-year mortgage close to 8%, the highest point in almost a quarter century.
Europe
Euro-area inflation eased to its lowest level in more than two years as the bloc’s economy shrank following an unprecedented ramp-up in interest rates. The data show that while the European Central Bank’s 10 straight hikes are helping to bring inflation back toward the 2% goal, they’re also taking a toll on households and firms by sending loan costs sharply higher.
UK housing and money supply data flashed warning signs for the economy, with figures that underscore the impact of a rapid series of interest rate increases from the Bank of England. Banks and building societies authorized the fewest mortgages in eight months, while money supply contracted sharply.
German output shrank in the third quarter — raising the risk that Europe’s largest economy is headed for a recession. The data underscore Germany’s struggle to bounce back from an energy-induced downturn last winter that was followed by two quarters of stagnation or minimal growth.
Asia
The Bank of Japan has tightly overseen the government debt market since it introduced yield-curve control in September 2016, with its ownership of outstanding bonds surpassing 50%. But with the authority now suggesting it’s ready to let the benchmark 10-year yield rise beyond 1%, investors look set to take back the helm.
China’s factory activity fell back into contraction in October, while services grew at a slower pace than expected, signaling that the economy remains fragile and is in need of support.
Taiwan’s economy grew at the fastest pace in a year as consumer spending continued to rebound, giving the government a much-needed boost before a critical presidential election in January.Emerging Markets
Saudi Arabia’s economy suffered its biggest contraction since 2020 during the third quarter, after the kingdom cut oil production to push up prices. Gross domestic product fell 4.5% in the third quarter compared to a year earlier, driven by a 17% drop in the oil economy.
Mexico’s economy accelerated more than forecast in the third quarter, buoyed by flourishing trade with the US and solid spending by Mexican consumers. Growth in Latin America’s second-largest economy is also due in part to extra spending on the part of the government, which has expanded programs and rushed to finish major infrastructure projects before President Andres Manuel Lopez Obrador’s term ends in late 2024.
World
Outside of the major central banks, Colombia, Norway, Czech Republic and Egypt held steady. Malaysia’s central bank also left rates unchanged and signaled it may extend the pause. Brazil cut for a third straight meeting, while the Dominican Republic and Armenia also reduced rates.
Israel’s military call-ups and partial economic freeze have triggered a sudden crash in activity and upended everything from banking to agriculture in its war against Hamas. They’re costing the government the equivalent of $2.5 billion a month, according to Mizrahi-Tefahot, a top Israeli lender.
A lack of rainfall, blamed on climate change, is leading to a steady decline in water levels on the Panama Canal. The problem is so bad that quotas are being imposed on how many ships can pass through it, a move set to snarl trade in energy, consumer goods and food as carriers are forced to sail thousands of extra miles to make deliveries.
