ECB Approves 10th Rate Increase; ; Bank of Russia Also Hikes; China Central Bank Cuts Short-Term Lending Rate; U.S. Retail Sales Rise By James Christie
Good day. The European Central Bank opted on Thursday to press on with its fight against sticky inflation, lifting interest rates again despite concerns that doing so could tip the eurozone into recession. President Christine Lagarde signaled the increase might be the last by the central bank, but didn't rule out further rate increases. On Friday, the Russian central bank raised its key interest rate as it struggles to contain resurgent inflation and signalled further rate increases could be in the cards as "significant proinflationary risks have crystallized" in the economy. Meanwhile, China's central bank cut a short-term lending rate, despite modest signs of economic improvement in the late summer, signalling policy makers' caution. In the U.S, the Commerce Department reported higher pump prices helped drive an increase in total retail sales in August from July. But Federal Reserve officials remain on course to hold interest rates steady at their meeting next week because core inflation has been relatively mild this summer.
Now on to today's news and analysis.
Top News European Central Bank Raises Key Interest Rate to Record High
The European Central Bank raised interest rates by a quarter percentage point to a record high but signaled that eurozone borrowing costs may have peaked, sending the euro tumbling.
In a split decision, ECB officials raised the bank's deposit rate to 4%, the 10th increase in a row and a vertiginous rise from below zero last year.
At a news conference, ECB President Christine Lagarde signaled that Thursday's rate increase might be the last , although she didn't rule out further hikes if economic data disappoint.
Russia Central Bank Raises Key Interest Rate
Inflation in the West has passed its peak. But in Russia, price rises have gained a second wind, bedeviled authorities and brought the consequences of Moscow's war in Ukraine closer to home. To stifle the rising prices, the Russian central bank on Friday lifted its key interest rate to 13% from 12% . It follows a big rate increase in August to stem a sharp selloff in the ruble. The central bank said that it could consider further increases as "significant proinflationary risks have crystallized" in the economy.
China's Economy Shows Fresh Signs of Fragile Recovery
China's economy showed modest signs of improvement in the late summer after months of feeble growth, tentative evidence that the slowdown in the world's second-biggest economy that is holding back global growth might be easing.
China isn't out of economic danger just yet, with a drawn-out property slump, falling exports and frosty relations with the U.S.-led West among a stack of challenges facing leaders in Beijing.
In a sign of policy makers' caution, China's central bank on Friday cut a short-term lending rate , a day after lowering the amount of reserves commercial banks need to hold against their deposits, freeing up funds for lending to households and businesses.
U.S. Economy Gasoline Price Jump Boosted Retail Sales in August
Higher gasoline prices helped drive a solid gain in U.S. retail sales in August, while consumers modestly boosted their spending on other goods. Retail sales rose by a seasonally adjusted 0.6% from July, the fifth straight month of gains .
Fuel Prices Are Soaring. Who Is Feeling the Pinch?
Diesel, jet and marine fuel prices are soaring, pressuring the construction companies, transportation businesses and farmers that are the biggest users. Behind the rise: production cuts made by OPEC and its allies.
Why Rising Fuel Costs Don't Tell the Whole Inflation Story
Strong Dollar Cuts Into Companies' Overseas Revenue
The resurgent dollar is hitting earnings for U.S. companies doing business overseas- hurting sales and profit margins as consumers abroad face higher prices-disappointing executives hoping for relief from the currency's surge.
UAW Strikes at Plants Owned by GM, Ford, Stellantis
The United Auto Workers union for the first time ever went on strike at all three Detroit car companies, with about 12,700 workers hitting the picket lines shortly after midnight Friday at plants in Michigan, Ohio and Missouri.
Key Developments Around the World West Fails to Peel Russia's Friends Away to Ukraine's Side
Many of the biggest emerging economies remain neutral on the war in Ukraine, and at next week's gathering of world leaders at the U.N. General Assembly, developing countries appear eager to shift the global focus onto their priorities.
Tension Between Ukraine and Poland Over Grain Exports Vexes EU
EU authorities must decide Friday whether to extend a ban preventing Ukrainian grain from being sold in neighboring EU countries, an issue that has sparked a rift between Kyiv and Poland, one of Ukraine's strongest backers in the war.
U.S. Sanctions More Than 150 Entities Over Trade With Russia
The U.S. sanctioned more than 150 foreign firms and individuals accused of aiding Russia, including by shipping technology for Moscow, expanding the Western effort to cut off goods the Kremlin needs for its war against Ukraine.
European Powers Choose to Maintain Iran Sanctions
European powers will keep in place sanctions on Iran's Islamic Revolutionary Guard Corps and trade in ballistic missiles with Tehran that were due to expire next month under the 2015 nuclear deal, European officials said.
Libya Flood Disaster That Killed Thousands Was Decades in Making
Deadly flooding was decades in the making-a result of years of official neglect of two nearby dams during the authoritarian regime of Moammar Gadhafi and the political crisis and war since his ouster in a 2011 revolution.
Financial Regulation Roundup China's Central Bank to Cut Reserve-Requirement Ratio Further
China's central bank said Thursday that it would further lower the amount of deposits banks have to set aside as reserves, releasing more liquidity into the nation's financial system amid slowing economic growth.
IRS Shuts Door on Pandemic Tax Credit Claims Until at Least 2024
The Internal Revenue Service is making its biggest moves yet to stop what officials say is a wave of fraudulent and overstated claims for a pandemic-era tax break, including an immediate halt to processing new refund requests.
Many Boards Are Playing Catch-Up on ESG and Green Issues
Many corporate board directors aren't confident about their ability-or their board's-to oversee sustainability and social impact issues , even as companies pursue such goals and regulators want more disclosures on them.
Forward Guidance Friday (all times ET)
8:30 a.m.: New York Fed's Empire State manufacturing survey; U.S. import and export indexes for August
9:15 a.m.: U.S. industrial production and capacity utilization for August
10 a.m.: University of Michigan consumer survey, preliminary for September
4:15 p.m.: Assets and liabilities of commercial banks in U.S.
Monday
8:15 a.m.: Canada housing starts for August
Research Markets to Focus on Duration of Restrictive ECB Rate Levels
The focus for markets regarding the European Central Bank will now shift to how long it keeps interest rates at current levels after its decision Thursday to raise rates by 25 basis points and its suggestion that rates have likely peaked, says Anna Stupnytska, global macro economist at Fidelity International. How long rates remain at this level will depend "on the inflation and growth trajectory from here," she writes in a note. With the monetary policy transmission channel working forcefully, recession in the eurozone looms on the horizon, she writes, adding, "The ECB might have to execute a fast course correction in 2024, but for the time being their guidance is likely to focus on the 'higher-for-longer' scenario."
-Emese Bartha
Commentary Rising Rates Make Big Companies Even Richer
The Fed jacked up interest rates to slow the red-hot economy. At some of the biggest and most secure companies, the moves had the opposite of the intended effect , boosting their profits and spending power, James Mackintosh writes.
Don't Bet Against the American Consumer Now
Americans might not be spending like there is no tomorrow, but they are certainly spending like they think tomorrow is going to be all right, adding to evidence current-quarter GDP growth will likely be very strong , Justin Lahart writes.
China May Dodge Deflation, After All
Improving economic data and supportive government measures make a protracted fall in Chinese consumer prices-which could trap the economy in a 1990s Japan-like cycle of falling prices- less likely , Nathaniel Taplin writes.
Europe's EV Troubles Run Deeper Than China
China is speeding ahead in the electric-vehicle race, and Europe's antisubsidy probes into Chinese EV makers reflects this, but tariffs alone aren't enough to keep Europe's automakers in the fast lane, Jacky Wong writes.
What the West Loses by Trading With Dictatorships
Instead of becoming more tolerant and democratic through intensified business links with the West, autocracies in China, Russia and the Middle East have become even more radical and undemocratic , Mathias Döpfner writes.
Mathias Döpfner is the CEO of Axel Springer, which owns Politico, Insider and Morning Brew. This essay is adapted from his new book, "The Trade Trap: How to Stop Doing Business With Dictators," which will be published on Sept. 19 by Simon & Schuster.
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09-15-23 0722ET
