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Fed Minutes Reveal Support for Rate Hikes if Inflation Proves Persistent

  • Federal Reserve officials began to weigh raising interest rates at their April meeting, shifting from prior debates about cuts.
  • The Middle East conflict, specifically the war in Iran, triggered the Fed’s rethink due to climbing energy prices and inflation concerns.

 
Bank of Japan Policymaker Signals That Rate Hike Might Be Approaching

  • A Bank of Japan policymaker warned Middle East tensions could cause underlying inflation to overshoot the BOJ’s target.
  • Policymaker Junko Koeda said Japan’s underlying inflation is likely around 2% and crude oil prices could remain elevated.
  • Koeda believes the economy will likely avoid a significant slump, despite risks of rate hikes slowing corporate activity.
Global Economy Slowing as Middle East Conflict Bites, Surveys Show

  • Business activity in Europe and Asia slowed in May due to rising energy costs and cooling new orders, linked to the Middle East conflict.
  • The eurozone Purchasing Managers Index fell to 47.5 in May from 48.8 in April, marking the sharpest decline since October 2023.
  • The services sector declined at its fastest pace since February 2021, with France experiencing the largest drop in activity.
Japan’s Exports Accelerate But Middle East Risks Cloud Outlook

  • Japan’s exports rose 14.8% in April from a year earlier, exceeding forecasts due to a weak yen and resilient global demand.
  • Japan’s petroleum imports from the Middle East plunged 67.2% in April, while U.S. imports surged 38.8% amid a push for alternative sources.
  • Economists expect Japan’s export momentum to weaken due to higher oil prices, prompting the Bank of Japan to consider interest rate hikes.
EU Reaches Agreement to Move Forward on U.S. Trade Deal

  • European lawmakers reached a provisional deal to remove some import tariffs on U.S. goods, ahead of a July 4 deadline set by President Trump.
  • The EU agreement eliminates duties on U.S. industrial goods and reduces duties on certain seafood and agricultural products.
  • The deal includes safeguards allowing the European Commission to suspend it if U.S. imports surge or the U.S. fails commitments.
China, U.S. Reach Limited Trade Agreements on Boeing Jets, Beef Imports

  • China agreed to purchase 200 Boeing jets and resume imports of some U.S. beef, signaling easing trade tensions.
  • Trade teams from both countries discussed tariffs and agreed to a framework for reciprocal reductions on $30 billion in goods.
  • The U.S. committed to lifting detention measures on Chinese dairy products, while China will expedite reviews for U.S. beef companies.
The Longest Internet Blackout in History Is Crippling Iran’s Economy

  • Iran is enduring its longest internet blackout, lasting nearly three months, with connectivity at 1% to 2% of total capacity.
  • The blackout has disconnected businesses, caused closures, increased unemployment, and damaged productivity, compounding an economic crisis.
  • Iran’s government rolled out “Internet Pro” for select users and is building a centralized regulated network, while Starlink use is illegal.
Canada Has ‘Fallen Way Behind’ on Port Logistics, Carney Says

  • Prime Minister Mark Carney stated Canada must quickly improve port efficiency to rebuild economic resilience and reduce reliance on U.S.-bound exports.
  • Carney aims to double the value of non-U.S. exports by 2035.
  • Carney’s government supports infrastructure projects like an expanded Port of Montreal.
Moody’s Downgrades Mexico to Baa3 With Stable Outlook

  • Moody’s Ratings downgraded Mexico’s long-term ratings to Baa3 from Baa2, changing its outlook to stable from negative.
  • Moody’s cited sustained weakening in fiscal strength and continued support for state oil company Petróleos Mexicanos.
  • Mexico’s economic growth is expected to remain subdued near term, with its stable outlook reflecting macroeconomic stability.
 

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