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Real-time News
April 27th - A survey of businesses access to financing released by the European Central Bank (ECB) on Monday showed that, affected by the war in Iran, eurozone businesses expect short-term inflation to rise, but long-term expectations remain stable, and wage growth expectations are actually slowing. The survey, covering over 10,000 businesses, including both pre- and post-war responses, showed no signs of a second wave of inflation, easing some concerns ahead of Thursdays meeting. The ECB stated that one-year inflation expectations jumped to 3.0% from 2.6% three months ago, while three- and five-year inflation expectations remained unchanged. Businesses did not raise their wage expectations; instead, they reported a slowdown in wage growth expectations. The ECB stated, "The Middle East war has significantly increased businesses expectations for selling prices and input costs, but has not affected wage expectations." The survey showed that wages are expected to grow by 2.8%, down from 3.1% three months ago. Businesses expect selling prices to rise by 3.5%, while input costs, including energy, are expected to rise by 5.8%.The European Central Banks survey on corporate financing channels shows that short-term inflation expectations have risen significantly, while medium-term expectations remain stable. Businesses anticipate the Iran war will drive a sharp increase in sales prices, but wage expectations have weakened slightly.On April 27th, Berenberg Bank economists stated in a report that high energy prices triggered by the Middle East conflict could keep UK inflation at around 3% in 2026, above the Bank of Englands 2% target. However, weaker wage growth in the UK should help mitigate the risk of high inflation. "While the war with Iran will keep inflation above target, the UKs inflation problem is unlikely to be more severe than in other countries."The ECBs survey on corporate financing channels indicates that companies report further tightening of bank lending rates and other lending conditions; corporate profits continue to deteriorate.On April 27th, UBS-Julius Baer analyst Magdalene Teo stated that the easing cycle in Asia has been put on hold as the Middle East conflict disrupts oil supplies and begins to show its effects on inflation and growth concerns. In her report, she noted that despite the weak yen, the Bank of Japan is widely expected to keep interest rates unchanged this week due to the uncertainty surrounding the war. The Monetary Authority of Singapore (MAS) tightened its policy slightly earlier this month to address inflation in advance. Thailand faces the risk of slower growth as its tourism industry, a pillar of its economy, is impacted by rising travel costs. The Philippines may raise interest rates to maintain price stability, while the Indonesian central bank will likely keep rates unchanged to support the rupiah, but a rate hike cannot be ruled out if foreign exchange reserves decline significantly.
