INTEREST RATES AND CURRENCIES: A sharp rise in Euribor for the year – surprising inflation news from the United States

Interest rates on US government bonds started to fall after the country’s statistics authority announced softer-than-expected producer price index numbers. The US producer price index rose 4.7 percent year-on-year, while Bloomberg economists had predicted a 5.1 percent increase.

The interest rate on the country’s ten-year government bond was 4.555 percent, down three percentage points. The interest rate on the two-year government bond was down by four interest points and the 30-year government bond was down by two interest points.

Weaker-than-expected producer price index numbers suggest that falling energy costs curbed inflationary pressures last month, giving the Fed room to hold off on raising interest rates. Inflation figures published on Tuesday also showed that consumer prices were moderate in June.

“There are encouraging reasons to expect that inflation has peaked and will decline in the coming quarters,” New York Fed Governor John Williams said in a speech on Wednesday, according to CNBC.

The head of the Fed Kevin Warsh however, has warned that the fight against inflation is not over yet.

“We have the tools for that [inflaation hallintaan]. Over the coming term, I’m going to ask our colleagues to have a proper family life debate about how much and on what schedule we should implement them,” he said Tuesday, referring to the Fed’s monetary policy tools.

Warsh did not directly say that he would tighten monetary policy, but made it clear that raising the key interest rate is one way to curb the rise in prices.

The market is currently expecting the US central bank, the Fed, to keep the key interest rate at its current range of 3.50-3.75% at its July interest rate meeting. The central bank is expected to raise interest rates once this year.

Euribors bounced

On the other side of the Atlantic, in Europe, interest rates on government bonds were mostly on a gentle rise. Germany’s and France’s ten-year government bond interest rate increased by about one percentage point, and Britain’s decreased by three percentage points.

Euribor rates saw a sharp rise on Wednesday, with the twelve-month Euribor rising to 2.916% on Wednesday from 2.825% on Tuesday. The one-year Euribor is the most popular reference interest rate for housing loans, among other things.

“The 12-month Euribor rate saw the biggest daily jump in almost four months today, as the new rise in oil prices has also raised expectations of an interest rate hike by the ECB. Next week, however, the central bank is unlikely to touch interest rates yet, but it could happen again in September”. Nordic chief analyst Jan von Gerich comments on the increase in the Euribor interest rate in X.

The rise in oil prices leveled off on Wednesday, and the rate followed Tuesday’s level. The price of Brent reference oil settled at 84 dollars per barrel at the time of the review.

On the foreign exchange market, rate movements have been small during Wednesday. At the time of review, one euro was worth 1.1439 dollars, 185.50 yen, 0.8489 pounds and 11.024 Swedish kronor. One dollar equals 162.16 yen and 0.7421 pounds.