The minutes of the Federal Reserve interest rate setting committee published on Wednesday show that several policymakers would have supported raising US interest rates last month even though they decided to leave them unchanged. The minutes also show that many officials were prepared to raise interest rates again this year.
Citing the lagged impact of policy and other concerns, committee members reached a consensus and voted unanimously to pause the US central bank’s most aggressive series of interest rate hikes in decades. The pause allows them time to reassess the state of the economy and the effects of banking stresses on credit availability, amid concerns over economic growth.
Meanwhile, the downturn in the eurozone manufacturing sector deepened in June, reflecting the impact of the European Central Bank’s interest rate increases over the past months.
The HCOB Eurozone Manufacturing PMI plummeted to 43.4 in June from May’s 44.8 as factory output declined at the sharpest rate since October 2022, impacted by concerns on the price and supply of energy.
The June survey data signalled a third successive monthly reduction in manufacturing output levels across the eurozone. Austria, Germany, Italy, Ireland and the Netherlands reported their sharpest declines in business conditions for over three years. Greece, on the other hand, reported improvement in manufacturing sector performance for the fifth month in a row.
Finally, in China, a measure of the country’s services activity compiled by the private sector retreated in June, in line with an official index that also signalled a slower recovery in the services industry.
The Caixin services purchasing managers’ index (PMI) came in at 53.9 in June, missing by a wide margin expectations of 56.2 and significantly below May’s reading of 57.1. June’s data was also the index’s second-worst reading this year.
According to Wang Zhe, senior economist at Caixin Insight Group, the foundation for economic recovery is not solid yet and the recovery is still coming in below expectations. Other challenges include weak internal growth momentum, below-average demand and mixed market expectations.
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