Good day. The Bank of England raised interest rates by their largest margin in 27 years earlier today, following the path of the Federal Reserve in using aggressive rate rises to bring soaring inflation back under control. In taking the move, the BOE has opted to follow a path set by its counterparts in the Federal Reserve: viewing soaring inflation as a risk warranting larger than usual jumps in interest rates, even if that puts economic growth in jeopardy. In Brazil yesterday, the central bank lifted its rate by a half point to 13.75%, the highest level in more than five years, and another increase may come in September. Meanwhile, former Federal Reserve Vice Chairman Richard Clarida, who left the central bank earlier this year, is returning to money manager Pimco as a managing director and global economic adviser. He was serving as Pimco’s global strategic adviser when President Trump made him the Fed’s second-in-command in 2018.

 Now on to today’s news and analysis.

The Bank of England raised its key interest rate by a half percentage point Thursday, the largest single step in more than a quarter-century, as the central bank follows the Federal Reserve in giving priority to the fight against inflation over the risk of hurting growth.

In a statement, the bank raised its key rate to 1.75% from 1.25%. That means the bank has increased borrowing costs at six straight meetings of its monetary policy committee, its longest such streak since the late 1990s.

Eight bank officials voted for the larger than usual rate increase while one voted to raise rates by a more modest 0.25 percentage points. Thursday’s increase was the largest since 1995 and the first half-point increase since the bank was granted independence in 1997.

Former Federal Reserve Vice Chairman Richard Clarida, who left the central bank this year two weeks ahead of the expiration of his term following questions raised over financial transactions he conducted at the onset of the coronavirus pandemic, is returning to money manager Pimco as a managing director and global economic adviser. Clarida previously spent 12 years at the Allianz unit and was serving as Pimco’s global strategic adviser when President Trump made him the Fed’s second-in-command in 2018. Joachim Fels, currently Pimco’s global economic adviser, is retiring at the end of the year. The Fed’s inspector general last month found Clarida didn't make improper financial trades during his tenure. (Dow Jones Newswires)

• Russian Oil Cap Push Faces Doubts From Energy, Finance Industry

8:30 a.m.: U.S. exports, imports and trade balance for June
12 p.m.: Cleveland Fed’s Mester speaks on monetary policy to Economic Club of Pittsburgh

8:30 a.m.: U.S. employment report for July

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• Growth in the U.S. services sector rebounded in July, reaching its fastest pace in three months, in a sign activity continued to expand despite mounting fears over inflation and an economic recession. The Institute for Supply Management said its index of services activity increased from 55.3 in June to 56.7 last month, the highest level since April. Economists polled by The Wall Street Journal expected the indicator to decline to 54.0. (Dow Jones Newswires)
• New orders for manufactured goods in the U.S. rose 2% in June on month, accelerating from the revised 1.8% rise in May, the Commerce Department said. Economists polled by The Wall Street Journal expected factory orders to increase 1.2% on month. New orders for durable goods meant to last at least three years increased 2% in June after rising 0.8% in May. (DJN)
• North American freight railroad traffic turned positive for the week ended Saturday, edging up 0.6% after weekly declines for most of the year, the Association of American Railroads trade group said. (DJN)
• India's central bank is expected to raise its policy repo rate by 50 basis points to 5.40% on Friday, according to a poll of six economists by The Wall Street Journal. Four economists project the Reserve Bank of India to increase the rate by half a percentage point, while the other two forecast a 35bp increase. (DJN)
• Eurozone retail sales decreased in June due to rising inflation and declining consumer confidence among households, Eurostat said, noting sales fell 1.2% from May. Eurostat revised retail sales data for May to a 0.4% increase, from a 0.2% on-month rise previously estimated. (DJN)
• Germany’s trade surplus stood at 6.4 billion euros ($6.51 billion) in calendar and seasonally adjusted terms in June after recording a revised €0.8 billion surplus in May, according to statistics office Destatis. Economists polled by The Wall Street Journal expected a surplus of €0.4 billion for June. (DJN)

This newsletter is compiled by James Christie in San Francisco.

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