Bank of England Expresses Caution on Economic Outlook
Bank of England Governor Bailey recently warned that while the overall economic performance is weakening, particularly with signs of fatigue in the labor market, the trajectory of inflation remains difficult to predict. He noted that the slowdown in economic growth is evident, but the persistence of price pressures is still uncertain, requiring cautious observation.
Speaking at the British Chamber of Commerce, Bailey stated that the current economic supply and demand is not yet fully balanced, and the persistence of medium-term inflation expectations puts policymakers in a dilemma. He emphasized that the current interest rate will not follow a predetermined declining path, but gradual reductions are possible if data permits. The current interest rate stands at 4.25%, with market expectations that the Bank of England will perform two rate cuts by the end of 2025.
He also warned that global geopolitical uncertainties, especially the volatility in the Middle East and significant changes in oil prices, could continue to influence inflation trends and subsequently affect policy stance.
UK Launches First Trade Defense Strategy Post-Independence
Meanwhile, the UK government is pushing a new trade strategy, emphasizing the need to enhance its ability to respond to global trade frictions and tariff fluctuations. According to Reuters, the UK will reform the Trade Remedies Authority to strengthen its ability to protect domestic industries. Business and Trade Secretary Reynolds noted that while upholding free trade, the UK must also bolster national interest protection.
UK steel companies have expressed support for this reform, emphasizing that the existing mechanisms do not adequately restrict imported steel. The new strategy also involves reaching an agreement with the US to remove certain tariffs, although the details of the agreement have yet to be finalized. Other businesses are also seeking government support, reflecting the systemic uncertainty facing British industries.
This strategy is the first systematic trade policy formulated post-Brexit, differing slightly from the previous Conservative government's emphasis on free trade, with the Labour government placing more emphasis on flexible and pragmatic agreement implementation.
Weak US Economic Data Causes Market Concerns
Across the Atlantic, US GDP data for the first quarter was revised down to -0.5%, mainly due to consumer spending growth being far below expectations at only 0.5%. Analysts noted that the massive tariff policies of the Trump administration might have prompted businesses to import early in the first quarter, boosting short-term demand and subsequently leading to weak consumption.
Additionally, the US labor market is starting to show signs of fatigue. Continuing claims for unemployment benefits rose to their highest level since November 2021 last week, although initial claims slightly decreased. The unemployment rate in June may rise from 4.2% to 4.3%.
The market is also awaiting the release of the US May core PCE price index year-over-year data on June 27, Beijing time, which is an important indicator for the Federal Reserve in judging inflation trends and may further influence market expectations of future monetary policy.
Airplane Orders Drive Durable Goods Rebound But Do Not Alleviate Policy Pressure
Data from the US Department of Commerce showed a 16.4% growth in durable goods orders in May, primarily driven by a 230% surge in commercial aircraft orders. A major Boeing order for 150 aircraft was the driving factor. However, economists pointed out that performance in sectors other than transportation was weak, with businesses significantly affected by trade uncertainties.
The Federal Reserve kept interest rates unchanged, with Chairman Powell emphasizing the need to observe the lagging effects of tariffs on prices. In an unclear policy stance, each fluctuation in economic data can potentially impact market sentiment.
