Morning Market Brief August 8, 2024

Global price pressures continue to ease

The Organization for Economic Cooperation and Development (OECD) reported that global inflation softened in June. This is welcome news for global consumers and businesses that have felt the pressure of higher prices. Despite the slowdown, inflation remains at relatively elevated levels, which is keeping central banks from lowering interest rates at an aggressive pace. Several global central banks have noted that some loosening is required but they are still in the process of battling inflationary pressures.

• The OECD reported that the global annual inflation rate was 5.6% in June, down from 5.9% in May. The OECD said this marks the lowest rate of global inflation since October 2021. The core inflation rate, which excludes more volatile items, dropped in June to its lowest level since March 2022.
• June’s slowdown was driven by easing growth in prices for energy products. Food prices were largely unchanged in June over May, with annual growth remaining just under 2% year-over-year.
• Among G7 nations, the annual inflation rate dropped to 2.7% in June from 2.9% in the previous month. The economic organization noted this was the lowest rate since March 2021. Lower inflation was seen in Canada, the US, France and Germany.
• Lower inflation has prompted several central banks to begin lowering interest rates, including the Bank of Canada (BoC), Bank of England and European Central Bank. The US Federal Reserve Board has yet to begin cutting interest rates, but signs are pointing to a potential? September rate cut.

We might see a few more global central bank rate cuts this year. However, rate cuts are likely to be relatively gradual as inflation is still above most central banks’ 2% target, which calls for a somewhat restrictive policy. The BoC has already lowered interest rates twice this year with signs pointing to more rate cuts ahead, according to its Summary of Deliberations released yesterday.

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