Charting the global economy: the ECB joins the Jumbo Rate-Hike Club

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The European Central Bank raised interest rates by an unprecedented three-quarters point this week, and another sharp adjustment next month remains a distinct possibility in an escalating assault on runaway inflation.

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The European Central Bank raised interest rates by an unprecedented three-quarters point this week, and another sharp adjustment next month remains a distinct possibility in an escalating assault on runaway inflation.

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Newly appointed British Prime Minister Liz Truss has outlined plans to save an economy in its worst shape since the 1970s. Britons were rocked on Thursday by news of the death of Queen Elizabeth II.

In Asia, the Chinese economy showed more signs of weakening as export growth slowed, while Japanese households cut spending.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

Europe

The ECB raised interest rates by a historic amount and President Christine Lagarde hinted that she could do the same in “several” future measures. A second hike of 75 basis points next month would match the Federal Reserve’s two most recent moves, illustrating the more aggressive approach taken by ECB officials of late as eurozone inflation at 19 nations are breaking record after record.

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British Prime Minister Truss, the so-called ‘disruptor in chief’, says she is ready to make unpopular decisions as she responds to the cost of living crisis facing households and businesses. Both measures could upset the markets for fear of fueling inflation.

European households will benefit from at least 376 billion euros ($375 billion) in government aid to stem huge energy bills this winter, but there is a risk that the panoply of spending will not bring enough of relief. This winter will be gloomy across the continent. The UK, which already has the highest electricity costs in Europe, is expected to see its winter bills soar by around 178%.

Asia

Chinese export growth slowed more than expected in August and imports stagnated, a sign of a darkening global economic picture and weak domestic growth hit by Covid shutdowns and a real estate crisis.

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Consumer price inflation in Taiwan eased significantly in August, easing some of the pressure on the central bank as it tries to balance rising interest rates against the need to support the economy.

Japanese households cut spending in July as real wages fell again amid rising virus cases and steadily rising costs of living, suggesting the country’s path to recovery is always weak.

WE

Household net worth shrank in the second quarter by the largest on record as the Fed’s aggressive action to rein in rapid inflation sent stocks tumbling. The $6.1 trillion drop sent net worth plummeting to $143.8 trillion, the lowest in a year.

The latest uptick in labor force participation may not last long — the rate is expected to drop to 60.1% in 2031 from 61.7% in 2021, according to a Bureau of Labor Statistics report. That would be the lowest since early 1973.

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Emerging Markets

Russia could face a longer and deeper recession as the impact of US and European sanctions spreads, crippling sectors the country has relied on for years to fuel its economy, according to a prepared internal report for the government. Two of the three scenarios in the report show that the contraction will accelerate next year, with the economy not returning to pre-war levels until the end of the decade or later.

Mexico’s annual inflation has hit its fastest pace since late 2000 in August, even as price growth in the United States begins to slow. Inflation has continued to rise despite the central bank’s 10 consecutive rate hikes totaling 450 basis points since June last year.

World

Chinese government data shows foreign investment in the economy has grown by almost a fifth this year, but a look below the 17.3% expansion in the first seven months of the year shows that much of the investment in China actually comes from Hong Kong. Foreign companies are still pumping new money into China, although the size and speed of this expansion is not as significant as some Beijing officials suggest.

As companies on Wall Street order employees back to the office, the option of working from home remains more popular than ever around the world, according to new research. About a third of American workers would quit or start looking for another job if they had to return to work five days a week, which is higher than the global average.

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