Vicky Pryce, International Economist and business consultant spoke to CGTN Europe. UK inflation is rising, but the Bank of England is still expected to cut interest rates in autumn 2022. China has kept its benchmark rate steady, signaling cautious monetary stimulus. The Fed's Jackson Hole meeting is in focus, with markets watching for any changes in stance due to President Trump's pressure for lower rates. Tariffs pose a significant challenge for central bankers worldwide, causing uncertainty in setting interest rates and predicting inflation.
00:00Well, let's talk to Vicky Price now, the international economist and business consultant.
00:05Vicky, lovely to see you. Welcome back. UK inflation rising faster than expected in July.
00:11How likely are we now to see interest rate cuts later this year?
00:17Well, the markets seem to have repriced the possibility of a cut, suggesting that it's unlikely that this will happen.
00:23And yet the Bank of England had already said that it expected inflation to rise to about 4% later this year and then start coming down and coming down to the target rate of 2% during 2026.
00:37I mean, the interesting thing is that the market have reacted to this 0.1% difference in the actual figures for July rather negatively.
00:48I mean, yes, it's true that we've seen food prices in particular going up and airfares going up.
00:55The airfares happen to be because the type of comparison that was made 12 months earlier is not exactly right or at least exactly comparable with where we are now
01:08because of the different timing that those fares were in fact looked at and therefore entered into the CPI.
01:15So it could be a one-off in terms of the slight increase faster than has been anticipated.
01:21But yes, the markets seem to have become rather pessimistic about this, which in many ways, I think, will be rethought, in my view, over the next few months.
01:30I think we still are going to see another cut, probably in the autumn, coming from the Bank of England.
01:35China holding its benchmark rates steady despite low inflation.
01:39What does that signal in terms of monetary stimulus?
01:43I think China has probably wanted to wait and see what is going to be happening.
01:49I mean, it's a very tumultuous period.
01:52You know, we have the tariff situation, which is obviously unsettling.
01:56But we have seen a slowdown in China, which therefore, you know, would have probably resulted or at least expected to result in a capped in rates.
02:07Inflation is still very low. So it will be interesting to see what they do next.
02:12But it's probably not a great surprise because if you look at the poll of economists beforehand, I think they all expect that there wouldn't be any change at this time either.
02:22And all eyes on the Fed, of course, ahead of the Jackson Hole meeting this Friday.
02:28What's going to happen?
02:32Well, all the eyes are indeed going to be on Jay Powell and what he says.
02:36We know the pressure on the Fed from President Trump has been rather significant.
02:41He wants to see lower rates.
02:43He's talking now about getting rid of yet another federal governor who's on the deciding committee.
02:52So he's clearly sort of stepping in in a big way, trying to influence, if you like, what happens in the next meeting.
03:01So what Jay Powell says is going to be very, very important in terms of whether it's going to be a softening of his stance or whether he's going to stick to the hawkish view he had before.
03:10It's hard to shed a tear for those poor old underpaid bankers.
03:15Interest rate decisions, never easy, of course.
03:18How big a challenge are Mr. Trump's rather unpredictable tariffs for central bankers all around the world?
03:26I think they are for all.
03:28And I think the interesting thing when you look at the U.S. in particular, it's not so much just the short-term rates.
03:33But what we've seen is that bond yields have gone up in the U.S.
03:36Bond yields have gone up in the U.K. as well.
03:39And that, of course, makes it much, much harder for companies to borrow, but also the cost and individuals,
03:44but also the cost of servicing debt, which is a serious issue both in the U.S. and in the U.K. in particular.
03:51What you've seen, though, elsewhere is that because there's been a re-evaluation of what sort of growth we're going to have,
03:57but also a little bit more confidence maybe that the Europeans have maybe their act together a little bit more than others.
04:05We've seen yields in Europe actually not doing that badly and interest rates, of course,
04:09by the European Central Bank coming down faster than elsewhere.
04:12So there is a bit of imbalance there.
04:14But, yes, you're absolutely right.
04:16It's a difficult job.
04:17You can't quite estimate what the tariff increases are going to mean in terms of prices.
04:21We are probably going to wait to see what happens in the U.S.
04:24Wholesale prices are going up already, so there is going to be, I think, a short-term, maybe medium-term uptick in inflation in the U.S.,
04:32and I think that's what is making the Fed a little bit sort of sceptical and careful about what they do next.
04:38Vicky, good to see you.
04:39Thank you for that.
04:39Vicky Price, the International Economist and Business Consultant.
04:42Vicky Price, the International Economist and Business Consultant.
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