World industrial production continued to recover in June, when the volume of output grew 4.8% MoM, following the modest 0.8% MoM growth in May. Despite the strong monthly growth figure in June, the level of industrial activity was still down by 7.2% compared with the previous year. From a regional point of view, the Eurozone and emerging Asia contributed the most to the stabilisation. World trade, on the other hand, just turned a corner in June when the volume of trade rose 7.6% MoM. Therefore, it is safe to say that as long as economies remain open, world industrial production and world trade will get a chance to continue edging towards the pre-pandemic level.
Fed Chair Jerome Powell announced that the Federal Reserve will adopt a ‘flexible form of average inflation targeting.’ In another major change, the Fed will now interpret its maximum employment goal as a ‘broad-based and inclusive goal,’ which means that rather than focusing solely on aggregate labour market metrics, Fed officials will scrutinise how low-income and minority labour market participants are doing. The Fed Chair – deliberately – did not use tight language and thus it will take some time for markets to fully understand how the new framework works in practice. In our view, Mr Powell sent a very strong signal to cement expectations for low(er) rates for a very, very, very long time.
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