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ECB Becomes First Major Central Bank to Raise Rates Since Inflation Resurgence
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- The European Central Bank raised its key interest rate to 2.25% from 2%, the first hike in almost three years, to tackle inflation driven by the war in Iran.
- The ECB became the first major central bank to tighten policy due to energy price jumps; the Fed and Bank of England are expected to hold rates.
- Europe’s economy has been hit harder by the war, with the ECB trimming growth forecasts and viewing the rate hike as “insurance.”
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Wholesale Prices Continued to Surge in May
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- The Labor Department reported the producer-price index rose 1.1% in May, exceeding analysts’ expectations of a 0.7% increase.
- The producer-price index increased 6.5% over the past 12 months, marking the fastest wholesale inflation since 2022.
- Energy prices rose more than 10% in May, contributing to the elevated wholesale inflation and impacting consumer prices.
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U.S. Jobless Claims Rose Last Week
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- U.S. jobless claims rose to 229,000 in the week through June 6, although the Labor Department said the labor market remains healthy.
- Economists surveyed by The Wall Street Journal had expected 220,000 new claims, lower than the reported figure.
- The U.S. economy added 172,000 jobs in May, marking its best three-month stretch in more than two years.
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Germany’s Bundesbank Cuts Growth Expectation, Raises Inflation Forecast as War Drags On
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- Germany’s central bank cut its GDP growth forecasts and raised inflation expectations for this year and next as the war in Iran weighs on the economy.
- The Bundesbank now expects 0.5% GDP growth this year and 2.9% inflation on an EU-harmonized basis, both revised from December.
- Bundesbank President Joachim Nagel said the European Central Bank is prepared to raise interest rates further to address persistent supply shocks.
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Bank of Korea Governor Signals Readiness to Raise Rates as Inflation Risks Mount
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- Bank of Korea Gov. Shin Hyun-song warned against falling behind on taming inflation, signaling urgency for policymakers to act.
- Gov. Shin expressed cautious optimism on growth due to an artificial-intelligence boom, but noted risks of sectoral disparities.
- Officials last week announced measures to aid the weakened won, which Gov. Shin expects to stabilize due to the nation’s current-account surplus.
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Turkey’s Central Bank Holds Rates Amid Elevated Energy Prices
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- Turkey’s central bank held its benchmark one-week repo rate at 37.0% for a third-straight meeting on Thursday.
- The bank cited high energy prices from the Middle East conflict and weak domestic demand as reasons for holding the rate.
- Turkish inflation climbed to 32.6% in May, its highest reading since October, driven by a jump in energy prices.
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U.K. Economy Contracted in April After Strong Start to Year
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- The U.K. economy contracted by 0.1% in April, marking its first decline since August, following a strong start to the year.
- The April contraction followed a 0.3% increase in March and a 0.6% rise in the first quarter, outpacing the U.S. and European peers.
- The strong first-quarter growth was partly due to businesses front-loading activity ahead of higher energy costs and Middle East conflict.
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SEC Seeks to Scrap Best-Price Rule
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- The Securities and Exchange Commission proposed eliminating a 2005 rule requiring trading platforms to execute orders at the best price.
- The SEC argues the rule is superfluous because U.S. equity markets are highly automated and brokers have a duty to clients.
- Eliminating the rule would save the brokerage industry $54.2 million to $77 million annually, the SEC said.
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About Us
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WSJ Pro Central Banking brings you news and analysis from a global team of reporters and editors at The Wall Street Journal and Dow Jones Newswires. Send your tips, suggestions and feedback to service@dowjones.com. An artificial-intelligence tool created these summaries, which are based on the text of the article and checked by an editor. Read more about how we use artificial intelligence in our journalism.
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