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How China fights inflation

The People’s Bank of China has stated that it will protect the Chinese economy from the dangers of inflation and has pledged not to engage in excessive money creation or major stimulus programs. During the month of July, inflation jumped to 2.7%, the highest level in the past two years. This was mostly caused by an increase in the cost of food, namely pork. However, overall pricing pressures were held under control by sluggish consumer demand. According to the People’s Bank of China (PBOC), the soaring inflation seen in the United States and Europe serves as a lesson for China’s macroeconomic policy. According to the report, China is expected to meet its objective of containing annual inflation to a range of 3% to 4% in 2022.
The People’s Bank of China (PBOC) has indicated in the past that it will prioritize expanding lending rather than lowering interest rates to support the economy. The sharp increase in prices seen in other major economies has prompted top leaders to express alarm about the possibility of inflation spillovers.

September interest rate hike

The markets are now pricing in the possibility of a raise of fifty basis points in September rather than a seventy-five basis point increase. The consumer price index rose 8.5% from the previous year, marking a slowdown from June’s 9.1% growth, representing the biggest annual increase in the past four decades. According to Derek Holt, an economist at Scotiabank, “It is early to assess the move that occurred in September.” The increase in the CPI for July “makes it more likely that our call will be right for the September FOMC — a hike of 50 basis points,” Michael Pond, head of the inflation strategy at Barclays Capital Inc., said in an interview on Wednesday. “It makes it more likely that our call will be right for the September FOMC.” The more stable measure of core inflation increased by 0.3% month-over-month and 5.9% year-over-year in July.

Even though these numbers were better than expected, officials from the Fed are likely to be worried about how distant they are from reaching their target inflation rate of 2%. There is still a solid argument in favor of raising interest rates by 75 basis points for a third straight time in September.

Growth of utility bills in Europe

As a result of Russia reducing gas supplies and heat waves disrupting rivers and waterways needed to transport fuel and chill power, Europe’s energy supplies are already under strain, and prices are on the verge of reaching record highs. The month before last, natural gas surpassed nuclear power as the primary source of electricity in Europe, emphasizing the difficulty of finding a suitable replacement fuel in time for winter.