Fed signals September rate cut and other economy stories to read this week

Federal Reserve Chair Jerome Powell has given the strongest indication yet that the US central bank will cut interest rates in September.

Speaking at the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming, he said: "The upside risks to inflation have diminished. And the downside risks to employment have increased.

"The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

It follows the release of minutes from the Fed's 30-31 July policy meeting where a "vast majority" of officials indicated support for a cut, citing progress in reducing inflation.

While the central bank kept rates steady at 5.25%-5.50%, it "opened the door to easing" at the upcoming 17-18 September meeting, Reuters noted.

However, a few officials warned that premature easing could actually reignite inflation, the minutes show.

Analysts from Evercore ISI predict that Powell could guide the committee towards multiple rate cuts if US economic data warrants it.

Japan's core inflation rose for the third consecutive month in July, with the core consumer price index (CPI) up 2.7% year-on-year, the latest data shows.

While this marks the 28th straight month that inflation has met or exceeded the Bank of Japan's (BoJ) 2% target, a slowdown in demand-driven price growth could complicate the central bank's decision on future rate hikes, Reuters says.

The "core core" CPI, which excludes both fresh food and energy costs, fell to 1.9%, dropping below 2% for the first time since September 2022.

Japan's economy rebounded sharply in Q2 on strong consumption, supporting further central bank tightening. This view was echoed by economists in a recent Reuters poll – 57% predicted the BoJ would raise borrowing costs again by the end of the year.

Eurozone business activity unexpectedly surged in August despite price hikes, reducing the likelihood of two further rates by the European Central Bank. However, this boost was partly due to a temporary spike in French services linked to the Olympics.

The euro has risen from the recent global currency turmoil to trade at its highest this year against the dollar – up over 2.5% in August – and is poised for its best month since November 2023.

Singapore's core inflation rose 2.5% in July, the smallest increase in over two years, giving its central bank room to consider easing policy, economists said.

The Commonwealth Bank of Australia has cut interest rates on some of its home loan products for new customers, raising concerns about heightened competition in the country's mortgage market.

India's business activity continued robust growth in August, driven by a strong services sector and easing price pressures, suggesting it will maintain its position as the fastest-growing major economy, Reuters predicts.

Democratic presidential candidate Kamala Harris, in her first economic policy speech, proposed millions of new homes, first-time buyer assistance, family tax breaks and a ban on grocery "price-gouging" to tackle rising prices, reports the BBC. The news follows Republican candidate Donald Trump's vow to combat inflation, boost energy production and improve Americans’ living standards at a North Carolina rally earlier in August, according to PBS.

Africa has advanced in using domestic resources for development but still faces a widening financing gap, says Zimbabwe's finance minister Mthuli Ncube. Here, he explains how reform is essential to address climate change and prioritize sustainable growth, with strong public-private partnerships needed to build a prosperous and inclusive continent.

In early August, Japan’s stock market collapse triggered global economic ripples. Experts link this downturn to carry trades, where investors borrow in low-interest currencies to invest in higher-yield assets. Widening interest rate gaps could further destabilize these trades, the World Economic Forum warns in its latest Chief Economists Outlook – learn more about them here.

How can we create more jobs in the Global South? Focus on goals such as generating new jobs, enhancing existing ones, or improving inclusivity, says Juan Carlos Thomas, Vice President Entrepreneurship & New Ventures, TechnoServe. Here, he outlines three critical questions every initiative must answer at the outset to be effective.