Global economy chart: Fed looks to cut rates as central banks show mixed responses to economic pressures

He Federal Reserve began its campaign to reduce interest rates with a cut half a percentage point larger than usual, while the Bank of England decided not to implement a second consecutive reduction.

The Federal Reserve Reduction of rateswhich was larger than forecasters had generally anticipated, is president Jerome PowellThe Fed’s attempt to ensure a soft landing for the economy. In the UK, central bankers warned investors that they will not be too quick to ease policy. monetary policy as they await further signs that inflationary pressures have eased. No decision was unanimous.

Meanwhile, Bank of Japan Governor Kazuo Ueda further sidelined the possibility of an October rate hike on Friday with a cautious message that pointed to ongoing concerns about the market meltdown that followed the July rate hike.

Below are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

US

The updated projections released alongside the Fed’s rate decision also showed that while the median policymaker supported another 50 basis points in cuts during its final two meetings this year, policymakers are still divided over how much more to ease before inflation has definitively returned to the central bank’s 2% target: Seven of 19 envisioned just 25 basis points of additional cuts in 2024, and two opposed any additional move this year.

In the United States, the average family of four spends more annually on child care than on housing. Both presidential candidates have laid out specific policy proposals to address housing affordability, but neither Kamala Harris nor Donald Trump have detailed how they would reduce costs for parents, who in many cases now spend $33,000 a year for two children on daycare.

Donald Trump has promised sweeping new tariffs to fund everything from tax cuts to child care. But economists say new import levies are unlikely to generate anything like the revenue boom he would need.

Europe

Policymakers from London to Frankfurt are signalling limited interest in following the US lead with sharp cuts in borrowing costs, opening a new transatlantic divide over the speed of global easing.

According to the central bank, Ireland may need to build around 52,000 new homes each year until 2050 to accommodate the country’s growing population, a figure far exceeding the government’s current target of 33,000 homes a year. Securing debt and equity finance may prove more difficult due to a complex planning process and low productivity in the construction sector, it said.

Asia

The Bank of Japan appears to want to closely monitor the impact of the July decision and avoid spooking markets again with a surprise. An unchanged monetary policy also keeps the bank out of the spotlight as Japan’s Liberal Democratic Party elects a new leader on September 27 to take on the role of prime minister. The central bank might also want to check how markets respond to the outcome of the US election.

Officials in Jakarta rushed through a quarter-point cut on Wednesday, and lower rates in the United States will free up room for rate-setters from Seoul to Mumbai to act as well. central banks They were forced to maintain a tight stance for months for fear of putting pressure on their currencies, the focus now turns to how much and how quickly they will cut policy or, in some cases, whether they will ease policy at all.

China’s overall budget spending has been cut at a faster pace amid an unprecedented drop in revenue earned by local governments from land sales, an alarming sign for an economy in desperate need of fiscal support.

President Xi Jinping’s decision to transform the world’s second-largest economy has upended the lives of millions of ambitious Chinese professionals. Sectors such as finance, consumer technology and real estate — key drivers of China’s growth for much of this century — have fallen out of favor. Instead, the most powerful Communist Party leader since Mao Zedong is channeling resources into initiatives such as electric vehicles and chip production. The new mantra is “high-quality,” not “high-speed,” growth.

Emerging markets

Argentina’s economy sank further into recession in the second quarter as the fallout from a currency devaluation and President Javier Milei’s austerity exacerbated the crisis. Milei has yet to pay a political cost after bluntly warning citizens during his inaugural address that his so-called “shock therapy” would be painful indeed.

Flooding in Africa, which is displacing millions of people from Guinea on the west coast to the Central African Republic more than 2,000 miles (3,200 km) to the east, is prompting warnings of dam failures and disease. In Chad, rising waters at the Chari and Logone dams could cause “catastrophic flooding,” a United Nations agency has warned, and the Cameroon government has increased its financial response more than fivefold.

World

Warehouses across China are bulging with grain as the economic crisis takes hold, forcing the world’s farmers to face the prospect of a lasting slowdown affecting one of their biggest customers. The strain on global markets is already being felt.

Coffee prices are set to rise further as persistent supply disruptions push prices for premium Arabica beans to their highest level in 13 years. The most-active contract eased later in the week as forecasts called for rain in parts of top producer Brazil, which has faced persistently hot and dry weather.

Aside from major central banks, Indonesia unexpectedly cut rates for the first time in three years, while South Africa and Eswatini also cut rates. Taiwan, Norway, Ukraine, Turkey, Angola, Chinese banks and Paraguay kept rates steady. Brazil’s central bank raised its interest rate by a quarter point and said further hikes are on the cards given resilient growth and inflation expectations.