The RBNZ raised the interest rate to a record high. The US can’t agree on raising the debt ceiling

The minutes from the last FOMC meeting will be released today. Despite the hawkish statements from Fed officials, about 88% of traders continue to believe that the US central bank will suspend the tightening cycle at the June meeting.

The latest economic data showed that the US manufacturing PMI fell into contraction territory from 50.2 to 48.5. The service sector was much better, with the PMI rising from 53.6 to 55.1. The drop in the manufacturing sector is the first wake-up call for the US Federal Reserve in terms of high-interest rates starting to have a negative impact on the economy.

The May Eurozone PMI report showed that fears of higher core inflation should be centered around services, while goods inflation is slowing. Services business activity continues to point to strong growth despite the index dropping from 56.2 to 55.9. Meanwhile, manufacturing business activity showed a slowdown for the first time in 6 months. The more than six-month decline in the index indicates a weakening of the manufacturing sector. The divergence between services and manufacturing is growing, with services inflation accelerating again.

According to the International Monetary Fund’s updated forecasts on Tuesday, the British economy will avoid a recession this year. The IMF now thinks the British economy will grow by a modest 0.4% this year, partly as a result of rising wages. Despite the more optimistic estimate, the IMF said that inflation is likely to remain high in the coming years and will not return to the Bank of England’s target of 2% until mid-2025.

At the moment all the factors are adding up to the rise in oil prices. First, the Canadian wildfires are reducing oil supplies in North America. Second, demand in the US is expected to increase after Memorial Day, which unofficially marks the start of summer road trips in America. Third, Saudi Arabia’s energy minister threatened yesterday to cut production sharply if oil prices fall below $70 a barrel. Fourthly, analysts still expect the growth of demand in China (the biggest oil importer).

Asian markets were mostly down yesterday, except the Indian index. Japan’s Nikkei 225 (JP225) decreased by 0.42%, China’s FTSE China A50 (CHA50) fell by 1.57%, Hong Kong’s Hang Seng (HK50) ended the day down 1.25%, India’s NIFTY 50 (IND50) added 0.18%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday negative 0.05%.

The Central Bank of New Zealand (RBNZ) expectedly to raise interest rates by 25 basis points to 5.5%, the highest level in more than 14 years. The RBNZ also said that inflation remains too high and still predicts a recession this year. According to the monetary policy statement (MPS) accompanying the rate decision, the RBNZ expects the official monetary rate at the current level of 5.5% to be the peak and remain at that level until the middle of next year.