- Tightening Signal From ECB After Fed And Boe
- Increase In Consumer Prices In China Exceeds Expectations
- E.U. To Consider Travel Restriction To USA
Tightening Signal From ECB After Fed And Boe
After the tapering messages from the Fed and BoE, Bundesbank Chairman Weidmann said that the ECB might tighten if necessary in line with the increase in inflation.
Governments across Europe have taken on debt to fund expenditure programs to mitigate the pandemic’s economic consequences.
This situation raises concerns that increasing inflation might set off a nightmare scenario in which interest rates rise and countries are burdened with billions in additional debt-service costs.
Weidmann stated that the ECB would reduce its asset purchase programs before the rate hike. With the delta variant cases on the rise again, pandemic concerns and inflation pressures prompted the European Central Bank (ECB), after the U.S. Federal Reserve (Fed) and the Bank of England (BoE).
The ECB kept interest rates at 0 % at its meeting last month but warned that increasing Delta cases pose a risk to the recovery after long-term closures and pandemic measures in the Eurozone economy.
“The ECB is not there to take care of the solvency protection of the states,” said Weidmann.
Should the inflation outlook rise sustainably, Weidmann said the ECB would have to act in line with its price stability objective. “We have to make it clear again and again that we will tighten monetary policy if the price outlook calls for it.
“We cannot then take into account the financing costs of the states,” he added.
Increase in Consumer Prices in China Exceeds Expectations
According to the data released by China’s National Statistical Institute, it was noteworthy that the increase in consumer prices in the country accelerated in July. In July, CPI increased by 0.3% monthly and 1% annually. Analysts’ forecast was 0.2% on the month and 0.8% on the year.
To be noted, China’s government is targeting 3% inflation this year.
On the other hand, producer prices increased by 9% year-on-year, above analysts’ forecasts of 8.8%.
The increase in PPI showed that enterprises continue to experience price pressure due to increasing raw material costs. Monthly, producer prices surpassed the forecasts of 0.5% and 0.3%.
In July, the country’s exports rose 19.3% year on year, falling short of the 20.2% expectation. China’s exports increased by 32.2% in June.
On the other hand, China’s imports increased by 28.1%, following the 36.7 % increase in June, below the expectation of a 33% increase.
Thus, the country’s trade balance in dollar terms rose to 56.59 billion dollars from 51.8 billion dollars in June.
In addition, Goldman Sachs cut its 2021 growth expectation for the Chinese economy from 8.6% to 8.3%.
In the organization’s report, the 3rd quarter growth forecast for the Chinese economy was also reduced from 5.8% to 2.3%. The 4-quarter forecast was raised from 5.8% to 8.5%.
E.U. To Consider Travel Restriction To USA
The E.U. will reevaluate travel restrictions next week due to increased cases in the U.S.
A source familiar with the matter reported that the U.S. had exceeded the threshold required to remain on the E.U. travelable countries list.
The E.U. lifted travel restrictions in June after the U.S. met the required criteria. However, according to the latest data in the country, the E.U.’s limit of 75 cases per 100 thousand people has been exceeded in the last 14 days. It was stated that the number of 270 cases per 100 thousand people had been reached, and this number is increasing day by day.
The E.U. added the U.S. to its list of safe countries in June, which currently includes Albania, Armenia, Australia, Azerbaijan, Bosnia and Herzegovina, Brunei Darussalam, Canada, Israel, Japan, Jordan, Lebanon, Montenegro, New Zealand, Qatar, Republic of Moldova, Republic of North Macedonia, Saudi Arabia, Serbia, Singapore, South Korea, Ukraine, and the U.S. (China is a possibility if the move is reciprocated, which is currently not the case).
Sources stated that those who have received two doses of vaccine could enter E.U. countries.
The lifting of the travel ban between the E.U. and the USA caused the European aviation sector to reach approximately 70 percent of its pre-pandemic capacity.
It is stated that reintroducing the travel ban will be negative for airlines such as Deutsche Lufthansa and Air France-KLM.