{"text":[[{"start":12.55,"text":"The recent re-escalation of the Iran war has forced investors to consider whether the renewed risk of inflation will push the Federal Reserve to raise interest rates at its policy meeting next week, its second with Kevin Warsh in the chair."}],[{"start":26.950000000000003,"text":"A week ago, traders in futures markets were putting the odds of a quarter-point rise at the meeting at less than 10 per cent. But a jump in oil prices above $100 a barrel for the first time since May sent the odds of an increase to 36 per cent by Friday. The first rate rise is fully priced in by September, with one and possibly two additional quarter-point increases expected over the following nine months. "}],[{"start":53.300000000000004,"text":"Oil prices have whipsawed since the start of the war in late February, as Washington and Tehran cycled through lulls and resumptions in fighting. Positioning in markets suggested that investors largely assumed that inflationary effects from the closure of the Strait of Hormuz — through which a fifth of the world’s oil normally transits — would be short term. "}],[{"start":75.65,"text":"Those assumptions shifted during the past week’s jump in oil prices. Investors across the globe unloaded sovereign debt, sending bond prices tumbling and the benchmark 10-year US Treasury yield to its highest in 18 months, with German and French 10-year yields hitting more than 15-year highs. Yields on long-dated bonds generally rise with inflation expectations. "}],[{"start":100.2,"text":"A robust US economy and a strong labour market — weekly jobless claims in the US on Thursday hit their lowest level since 1969 — add to the case for raising interest rates in the near term. Even though consumer inflation fell to an annual pace of 3.5 per cent in June, it is still well above the Fed’s 2 per cent target."}],[{"start":120.9,"text":"However, markets remain uncertain given Warsh’s avowal not to offer investors any guidance on where monetary policy is headed. "}],[{"start":129.15,"text":"“July is live, baby,” said Ed Al-Hussainy, a portfolio manager at Columbia Threadneedle. “The Fed has reasons to raise. Both inflation and the labour market have surprised to the upside.” Kate Duguid"}],[{"start":142.15,"text":"Will the Bank of England strike a hawkish tone as oil prices rise again?"}],[{"start":147.85,"text":"Traders in swaps markets expect the Bank of England to keep its benchmark interest rate unchanged at 3.75 per cent on Thursday — but with oil prices surging back to around $100 a barrel in recent days, investors will be watching closely for signs of how the central bank might approach renewed inflation."}],[{"start":166.2,"text":"Traders are pricing in just an 11 per cent chance of a quarter-point interest rate rise next week, reassured by data this week showing that UK annual inflation fell more than expected in June, hitting a 15-month low of 2.6 per cent."}],[{"start":181.64999999999998,"text":"Recent GDP data has also shown sluggish economic growth in the UK, adding to the view that the bar for raising interest rates is a high one."}],[{"start":190.84999999999997,"text":"But the respite for inflation may not last long. The recent flare-up of the Middle East conflict sent global oil prices back above $100 a barrel, prompting a sell-off in short-dated gilts as investors worried about more inflation coming down the track. "}],[{"start":205.34999999999997,"text":"The surge in energy prices will “pose a material risk to future inflation readings”, said Sonali Punhani, chief UK economist at Bank of America. "}],[{"start":215.49999999999997,"text":"But the Wall Street bank does not expect the BoE to respond just yet, with Punhani adding that “so far, there is no strong evidence of the pass-through of the energy shock to core inflation and wage growth,” while minutes from the last meeting suggest the Monetary Policy Committee is “in no rush to act”, she said. "}],[{"start":235.24999999999997,"text":"But while rates are likely to remain steady on Thursday, investors are more uncertain about the path for the rest of the year and will be listening closely for signs of hawkish concern from governor Andrew Bailey. Emily Herbert"}],[{"start":247.24999999999997,"text":"Will Euro area inflation jump back above 3 per cent?"}],[{"start":250.89999999999998,"text":"After ECB president Christine Lagarde’s hawkish comments when the central bank kept its policy rate unchanged at 2.25 per cent on July 23, investors and economists will closely scrutinise GDP and inflation data next week to cross-check her assessment that risks for growth are to the downside while risks for inflation are to the upside. "}],[{"start":270.79999999999995,"text":"During the second quarter, the Euro area’s economy is expected to have held up better than feared at the onset of the Iran war in late February. Economists polled by Reuters forecast that GDP will have grown by 0.2 per cent from the previous quarter in spite of surging energy prices and uncertainty over the war in the Middle East. In the first quarter, the area’s economy contracted by 0.2 per cent due to an unexpectedly large setback in Ireland, where GDP numbers are often distorted by profit transfers of global corporations running their European operations from the country."}],[{"start":308.19999999999993,"text":"“The economy seems to expand at a moderate pace and sentiment is picking up,” said Karsten Junius, chief economist at Bank J Safra Sarasin. "}],[{"start":319.3999999999999,"text":"Inflation is expected to have ticked up to an annual pace of 2.9 per cent in July from 2.8 per cent in June. The snag is that the data is backward-looking and will not fully include the recent rebound in oil prices. "}],[{"start":334.0999999999999,"text":"“We believe the ECB may need to wait a bit longer to get confirmation of material second-round effects,” Société Générale economist Anatoli Annenkov wrote on Thursday after the ECB decision. Olaf Storbeck"}],[{"start":354.5499999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1785124501_5159.mp3"}