On Thursday, the European Central Bank is widely expected to raise its key interest rates by 25 basis points for a second time this year, taking the deposit rate to 2.50%, as concerns over persistent inflation continue to mount.

The ECB's Governing Council is unlikely to disappoint current market expectations, having signalled the prospect of further tightening over the past six weeks.

At its 23 July meeting, the key deposit rate was left unchanged, with policymakers saying they were closely monitoring the "intensity and duration of the [energy] shock" stemming from the ongoing US-Iran conflict in the Middle East, particularly around the Strait of Hormuz.

(Continue Reading – LS)

Economists such as the Brookings Institution's Robin Brooks have popularised the idea that Japanese bond yields are soaring because global investors fear a debt crisis, triggered by Prime Minister Sanae Takaichi's ​largesse and public debt near 200% of GDP. Some Wall Street strategists argue that the only way out is Japan ‌Inc selling part of its $5.3 trillion — 120% of GDP — in foreign portfolio assets. Yet reality sits uneasily with those narratives: supposedly flighty foreign capital, not domestic money managers, are the ones happily snapping up Japanese sovereign paper.

For years, Japan has been watched for clues about whether chickens will come home to roost for vastly indebted developed ​economies. Despite recent energy crises rocking the world, the Bank of Japan has resisted raising interest rates too quickly, while Takaichi ​has pushed forward with a 370 trillion yen ($2.41 trillion) investment splurge.

(Continue Reading – RTRS)

By threatening ships in the Strait of Hormuz and attacking the energy facilities of its Gulf neighbors, Iran has imposed economic costs on the US for the war it launched at the end of February. Now the Houthis, Iran’s allied militia based in Yemen, are raising the stakes further.

The Houthis have periodically attacked vessels near another important oil export corridor — the Bab el-Mandeb strait that connects the southern Red Sea to the Gulf of Aden — since late 2023. In July, after US ally Saudi Arabia shifted more of its oil exports to the Red Sea route, the Houthis struck two tankers carrying Saudi crude.

(Continue Reading – BBG)