Charting the global economy: ECB cuts interest rates amid global economic challenges
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(Bloomberg) -- The European Central Bank is nearing the end of its campaign to lower interest rates after its eighth reduction in a year, according to ECB President Christine Lagarde With the euro-zone economy suffering repeated blows from US tariffs, the deposit rate was lowered by a quarter-point to 2%. India's central bank cut interest rates as well and reduced the cash reserve ratio for banks, providing a major liquidity boost to the economy.Bank of Canada officials, meanwhile, remained sidelined but indicated they stand ready to loosen policy should the economy weaken because of US trade policy In the US, the closely watched jobs report showed payrolls growth is moderating, rather than abruptly weakening.Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:The ECB cut its deposit rate a quarter-point to 2% — as predicted by all analysts in a Bloomberg survey. The ECB said inflation 'is currently at around' its target, and reiterated that it's not pre-committing to a particular path for borrowing costs. Officials said in a statement that while trade uncertainty is likely to weigh on business investment and exports, government investment in defense and infrastructure will boost growth later.The euro zone is set to continue its eastward expansion after Bulgaria was deemed ready to become the currency bloc's 21st member. The European Commission recommended on Wednesday that the Black Sea nation of 6.4 million should be allowed to adopt the common currency in 2026.The rift in Russia's two-track economy is becoming wider as businesses tied to President Vladimir Putin's invasion of Ukraine thrive and the rest are struggling for resources. Massive spending on the war has left growth increasingly confined to the military-industrial complex, with the imbalance in the economy underscoring how the Kremlin is ready to continue the war, but will potentially need years to return to normalcy even if the fighting stops.NATO member states signed off on the military alliance's most ambitious military ramp-up since the Cold War as leaders closed in on an agreement to ratchet up spending at a summit later this month. The summit, which planners have limited to a single working session focused solely on the spending target, will also involve delicate diplomacy to win over US President Donald Trump, who has made the 5% a key demand to reduce European reliance on American military power.US job growth moderated in May and the prior months were revised lower, indicating employers are cautious about growth prospects as they weigh the Trump administration's economic policy. However, the 139,000 increase in payrolls, which was slightly above expectations, helped alleviate concerns of a more-rapid deterioration in labor demand.The US trade deficit narrowed in April by the most on record on the largest-ever plunge in imports, illustrating an abrupt end to the massive front-loading of goods by some companies ahead of higher tariffs.China's manufacturing sector had its worst slump since September 2022, according to a private survey, as higher tariffs took a toll on smaller exporters despite a truce in the trade war with the US.Thursday's offering of Japanese government bonds points to a general lack of appetite for longer-maturity debt that is afflicting markets from Japan to Europe and the US. Several auctions of longer tenor Japanese bonds in recent weeks have met shaky demand, with the market flashing a warning that authorities in Tokyo may need to reconsider their issuance plans.Japan's fertility rate declined in 2024 for the ninth consecutive year, reaching another historical low that underscores the immense challenge facing the government as it attempts to reverse the trend in one of the world's most aged societies.Vietnam's exports and trade surplus rose more than expected in May, signaling companies are racing against the backdrop of talks aimed at averting the US's threatened 46% tariff.As leaders from Abu Dhabi, Doha and Riyadh competed to pledge trillions of dollars for US investments during President Donald Trump's recent visit to the Middle East, bankers behind the scenes quietly agreed: Saudi Arabia isn't the draw it once was.The OECD slashed its global forecasts for the second time this year, citing the impact of US tariffs. The combination of trade barriers and uncertainty are hitting confidence and holding back investment, according to the organization.In addition to the ECB and Bank of Canada policy meetings, Lesotho, Denmark, India and Russia lowered interest rates. Central bankers in Poland, Kazakhstan and Ukraine held the line on borrowing costs.
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