Bank of England chief sees downward interest rate trend as UK hunts for growth

Economic

Central Bank

Summary:

Bank of England Governor Andrew Bailey expects a gradual decline in interest rates amid persistent inflation and weak growth. Fiscal constraints limit UK options, with tax hikes seen as the likeliest path forward.

Bank of England Governor Andrew Bailey told CNBC Tuesday that “the path of interest rates will continue to be gradually downwards,” as the central bank juggles taming inflation and stoking elusive economic growth.

“I haven’t changed my mind on that,” he told CNBC’s Annette Weisbach in Sintra, Portugal, where the European Central Bank is holding a forum. “But in terms of where are we going to go in the next meeting? Well, we’ll see.”

Economists expect policymakers will cut rates by 25 basis points at their next gathering in August, which would take the central bank’s base rate from 4.25% to 4%.

But BOE’s Bailey told CNBC that policymakers needed to gauge whether persistent inflationary pressures, such as averages wage outpacing inflation and higher energy prices, would continue to soften.

“For me, the key question is, is that softening that we’re beginning to see going to come through and create the context where inflation will come back down to target?” he cautioned.

The BOE has a 2% inflation target, but price rises have stubbornly exceeded that level, landing at 3.4% in May — well above the neighboring euro zone’s latest inflation print of 2% in June. Growth meanwhile remains elusive, with the U.K. economy shrinking sharply in April as global trade tariffs and new domestic tax rises kicked in.

U.K. Finance Minister Rachel Reeves — who last fall introduced tax increases on businesses to largely fund a mammoth public spending program — said the latest growth data was “clearly disappointing.”

She also responded to the May inflation reading by insisting that the Treasury had taken “the necessary choices to stabilise the public finances and get inflation under control,” referencing her “fiscal rules” that dictate that day-to-day government spending won’t be funded by borrowing.

In the time since those “non-negotiable” rules were set last October, however, the U.K.’s economic and fiscal outlook has become more challenging, with higher debt interest payments and weaker-than-expected tax receipts converging with lower economic growth forecasts. Back in March, the independent Office for Budget Responsibility said that it expects the U.K. to record 1% growth this year and 1.9% in 2026.

Chancellor Reeves has acknowledged that there is “more to do” as the government desperately seeks to boost growth in the U.K. economy.

In order to achieve that while sticking to her fiscal rules, Reeves has essentially been left with three options: cut public spending, increase borrowing or raise taxes further.

Economists say the latter choice is the government’s only real option, as it has already committed to higher public spending and a more sustainable borrowing framework.

Central bank policymakers tend to steer clear from commenting on governments’ fiscal policies to avoid accusations of interference or bias. Bailey nevertheless on Tuesday told CNBC that, while it was important that Reeves had “set out a very clear fiscal framework,” there should be a “suitable amount of flexibility in that.”

“The U.K. has got a fiscal framework that the chancellor and I discuss it often. I know the chancellor is very committed to having a robust fiscal policy in place, and that is important as a backdrop to macroeconomic stability,” he said.

Source: cnbc

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Daniel Carter

Economic

Political

The U.S. and India are nearing a deal to lower tariffs on American imports to the South Asian country and to help India avoid levies imposed by the Trump administration rising sharply next week, Treasury Secretary Scott Bessent said on Tuesday.

"We are very close with India," Bessent told Fox News in response to a question about progress on trade negotiations.

Indian officials extended a visit to Washington last week through Monday to try to reach agreement on a trade deal with PresidentDonald Trump's administration and address lingering concerns on both sides, Indian government sources told Reuters.

India is one of more than a dozen countries actively negotiating with the Trump administration to try to avoid a steep spike in tariff rates on July 9, when a 90-day tariff pause ends. India could see its new "reciprocal" tariff rate rise to 27% from the current 10%.

The U.S.-India talks have hit roadblocks over disagreements on import duties for auto components, steel, and farm goods, ahead of Trump's deadline to impose reciprocal tariffs.

"We are in the middle — hopefully more than the middle — of a very intricate trade negotiation," Indian Foreign Minister Subrahmanyam Jaishankar told an event in New York on Monday.

"Obviously, my hope would be that we bring it to a successful conclusion. I cannot guarantee it, because there's another party to that discussion," said Jaishankar, who is in the U.S.for a meeting of the China-focused Quad grouping.

He added that there "will have to be give and take" and the two sides will have to find middle ground.

Bessent told Fox News that different countries have different agendas for trade deals, including Japan, which Trump complained about on Monday. But Bessent added that career trade negotiators are impressed with the offers that countries are making to the U.S.

"People who have been at Treasury, at Commerce, at USTR for 20 years, are saying that these are deals that they have never seen before," Bessent said.

So far, only Britain has negotiated a limited trade deal with the Trump administration, accepting a 10% U.S. tariff on many goods, including autos, in exchange for special access for aircraft engines and British beef.

Source: Reuters

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Adam

Stocks

Three themes tell the story of the year so far, embodied by three stocks that encapsulate the highs and the lows of the first half of 2025.

Boeing (BA) has become the government's favorite trade talk tool, representing resilience and preferential treatment from D.C.

Walmart (WMT) captures the other side of the tariff challenge, warning of price increases and omitting some guidance as the outlook remains uncertain.

And thirdly, the volatility around Tesla (TSLA), and by extension its CEO and former government employee, Elon Musk, reflects the chaos of the last several months and the shifting policies and alliances that have driven the market.

Boeing has emerged as a clear winner in the first six months of this year's trading after spending most of its recent memory marred by a series of high-profile blunders.

But the stock is riding the momentum of several trade deals, becoming an instrument of US statecraft. The Trump administration has wielded contracts with the aerospace manufacturer like a bargaining chip, reinforcing the company's importance as a marquee ticker and a symbol of American might. Shares are up 20% for the year, and have even recouped the losses following the Air India crash of a Boeing 787 on June 12.

While not featured in trade talk deals the way Boeing has been, another name stands out for rising on shifting political winds, expanded government work, and AI excitement: Palantir (PLTR).

The best performer in the S&P 500 last year, it's a stock that has long been at the top of trending charts. Palantir shares are up more than 80% so far this year as the administration seeks to use the company's security and defense technology for data analysis.

But for every Palantir and Boeing there are dozens more tickers (and many more private companies) that are being squeezed by tariffs and the prospects of more to come.

Walmart, the nation's largest retailer, reported mixed numbers in its first quarter report, noting that tariffs had already led to price increases in April and May. While executives said they expect net sales for the second quarter to increase as much as 4.5%, they did not provide guidance for adjusted earnings or operating income for the second quarter.

The absence of full guidance underscored a broader challenge for corporations across the country: coping with the consequences of tariff policy without knowing their full scope and their ultimate impact. Still, Walmart has gained about 7% this year, slightly ahead of the benchmark S&P's 5% increase.

Getting a handle on 2025's unpredictability wouldn't be possible without also reflecting on the losses. And that's where Tesla comes in. The company's mercurial stock chart highlights the exuberance that defined the start of the year, only to be followed by tariff anxiety, the tug-of-war between bulls and bears, and the falling out between Musk and Trump.

The push in Washington to advance the administration's signature legislation, with key implications for the clean energy industry, once again brought their disagreements center stage. Musk issued a series of weekend posts calling the bill "utterly insane and destructive [with] handouts to industries of the past while severely damaging industries of the future."

Earlier this month, their public feuding led to the loss of $150 billion of Tesla’s value. Meanwhile, Tesla's ambitions to build a nationwide fleet of robotaxis were met with renewed enthusiasm after a launch event last week.

Perhaps investors cheering a fairly mediocre launch of a handful of scofflaw robotaxis is the best encapsulation of the past six months, illustrating the market's singular ability to play down a regrettable present and look forward.

Source: finance.yahoo

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Thomas

Central Bank

Bank of Japan Governor Kazuo Ueda said on Tuesday the country's underlying inflation was still "somewhat below" the central bank's 2% target.

Speaking at a seminar in Portugal hosted by the European Central Bank, Ueda also said the range of the BOJ's estimate on the neutral rate was "very large", though the bank's current policy rate was "below neutral".

While headline inflation has been above the BOJ's 2% target for more than three years, due largely to rising food prices, underlying inflation remains somewhat below the target, he said.

There are three components defining inflation dynamics, one of which is price rises driven by robust demand accompanied by wage increases, Ueda said.

Another is driven by cyclical components such as the negative impact of U.S. tariffs on the economy and prices, he said. The third is "domestic supply shocks" generated by rising food prices, he added.

When asked what would trigger additional interest rate hikes, Ueda said: "It will depend on the relative strength of the three dynamics."

Ueda said he gets useful insights from his global counterparts when attending international meetings, some of which he said he considers incorporating in setting the BOJ's economic outlook and monetary policy strategy.

"Headline inflation is above 2%. Underlying inflation is below 2%. I want both to converge to 2% by the time I leave office," said Ueda, whose five-year term ends in 2028.

Ueda said inflation may durably hit 2% by the end of his term, but added that he would not have finished reducing the BOJ's huge balance sheet to appropriate levels - something he said he will likely entrust to his successor.

The BOJ ended a massive stimulus last year and in January raised short-term interest rates to 0.5%. It has signalled readiness to hike rates further if it becomes convinced that underlying inflation will hit its 2% target in a durable way.

Source: TradingView

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Daniel Carter

Central Bank

Economic

The Bank of Korea remains concerned at the tariff impact on economic expansion rather than inflation and is judging how to keep cutting interest rates while weighing stability risks, according to Governor Rhee Chang-yong.

With South Korea unlikely to retaliate strongly to US levies, Chinese export costs falling and domestic growth below potential, policymakers in Seoul are determining their next easing move, he signaled during a panel discussion at the European Central Bank's annual forum in Sintra, Portugal.

“Our current inflation is well stabilized around 2% and we believe tariffs tends to be deflationary rather than inflationary,” Rhee said, speaking alongside four peers including Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde. “Our problem is not inflation itself, but the growth impact of tariffs.”

The BOK has lowered interest rates four times since late last year to help shore up a sputtering economy that shrank in the first quarter, with the most recent reduction in late May bringing the benchmark rate down to 2.5%.

While policymakers are trying to revive growth after a slowdown in exports, months of domestic political turbulence and concerns over Donald Trump's trade tariffs, they are also concerned about lowering rates too quickly and overheating an already frothy property market in Seoul.

“We have been in an easing cycle,” he said. “Recently financial stability risks have been rising — especially housing prices in metropolitan areas have been increasing very fast — so we are keeping an eye on this financial stability risk in deciding the pace and the timing of further cuts.”

Governor Rhee has repeatedly flagged concerns over a potential surge in household debt linked to a property market rebound, signaling caution over further easing. He has stressed the need to balance growth support against financial stability risks.

Rhee said that at times of global turmoil, swap lines with other central banks were “crucial,” but he also highlighted that these are limited to moments when the Fed has legal authority to act.

“What happens if there is our own problem and there is no global dollar shortage?” he asked. “That is why having an adequate, sufficient level of reserves is very important” he said, before adding that “thanks to the introduction of the FIMA repo facility by the Fed, actually these reserves become a much more effective tool to defend ourselves.”

Powell, who spoke next, reassured Rhee that “nothing has changed relative to our swap lines — we still have the same authorities and we're still prepared to use them in situations where it's within our legal authorities and where it makes sense.”

Source: Bloomberg Europe

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Warren Takunda

Cryptocurrency

Key takeaways:

Bitcoin's 98% supply in profit signals bullish sentiment but warns of volatility and potential price corrections.

Analysts predict BTC could hit $200,000 by 2025, but sustained demand is key.

Bitcoin price predictions of $200,000 by the end of 2025 are becoming increasingly common, as a surge in profitability not only signals growing bullishness but also risk of a correction in the shorter term.

Bitcoin supply in profit soars to 98%

BTC supply in profit rose sharply to 98% from 87% between June 22 and Sunday, according to onchain data resource Glassnode. As of Tuesday, about 96.7% of all Bitcoin were in profit, sitting above the high band as shown in the chart below.

Historically, such elevated levels lead to market volatility as the potential for profit-taking grows, reflecting bullish sentiment amid caution for price corrections.

Between January and April, for instance, BTC price fell to $74,000 from about $109,000, a drop preceded by Bitcoin’s profitable supply rising to as high as 98.8% on Jan. 21. Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_1

Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_1

Bitcoin: Percentage of supply in profit. Source: Glassnode

Profitability data reflects these bullish albeit cautious market conditions. For instance, Bitcoin’s realized profit/loss ratio has jumped to 2.8 from 1.1 since June 22, exceeding the high band threshold of 2.4, a 156.4% rise. Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_2

Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_2

Bitcoin: Realized profit/loss ratio. Source: Glassnode

While this “reflects strong market confidence, it hints at heightened risk of profit-taking and demand exhaustion if price momentum falls,” Glassnode analysts said in their latest Weekly Market Pulse report.

“The market looks to have entered a cautiously optimistic regime, with stronger positioning from institutional players and renewed accumulation,” Glassnode explained, adding:

“For this rally to sustain, continued demand and broader market confidence will be essential.”

Bitcoin set for “explosive” breakout to $200,000

In November 2022, Bitcoin bounced from the bear market bottom at $15,500, staging a 590% rally to the current price of about $107,000. This price action has seen higher highs and higher lows, forming a channel in the weekly time frame, according to analyst Stockmoney Lizards.

“Bitcoin is about to break out of a multi-year channel,” the analyst said in a Monday post on X.

An accompanying chart showed the price seeking to break above the upper trendline, with the Stockmoney Lizards setting the short-term target at $140,000 and the end-of-year target at $200,000. Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_3

Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_3

“The next leg will be explosive.”BTC/USD weekly chart. Source: Stockmoney Lizards

This aligns with the analyst’s earlier predictions that Bitcoin’s breakout of the monthly Optimized Trend Tracker (OTT) bands also targets $200,000 in 2025, with a possible “extension” to $250,000 next year.

Analyst Mags said Bitcoin’s breakout above the same upper trendline as Stockmoney Lizards’ “could trigger a massive bull run.” Mags’ short-term target is the 2.618 Fibonacci level at $155,000. Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_4

Bitcoin Targets $200K as Profit Metrics Enter ‘Cautiously Optimistic’ Zone_4

Source: Mags

The Bitcoin price prediction of $200,000, in particular, is becoming an increasingly popular target for the second half of 2025. For example, 21st Capital co-founder Sina predicts BTC may hit $130,000 to $200,000 by Q4 2025 based on a power law model.

Bitwise Investment said that a falling US Dollar Index fueled by US President Donald Trump’s trade policies could push BTC to $200,000.

Bernstein Research said Bitcoin has the potential to reach $200,000 by the end of 2025, backed by increased institutional demand through spot Bitcoin ETFs and BTC treasury companies.

Source: Cointelegraph

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Damon

Economic

One month after the BLS reported that in April the labor market rebounded, as the number of job openings rose sharply by 191K to 7.4 million, and far above estimates of a 7.1 million print, moments ago we got another indication that the labor market is staging a remarkable rebound when the BLS reported that in May the number of job openings soared by 374K to 7.769 million, the highest since Nov 2024 and smashing estimates of a drop to 7.3 million (from an upward revised 7.395 million print).

According to the BLS, the number of job openings increased in accommodation and food services (+314,000) and in finance and insurance (+91,000). The number of job openings decreased in federal government (39,000)

but the highlight is that after a mysterious spike last month which prompted us to muse if DOGE had achieved anything at all, we got a resounding answer today when the BLS confirmed that last month's jump was an outlier and the number of Federal government job openings tumbled by almost a third, from 128K to just 89K, the lowest since covid.

In the context of the broader jobs report, it appears the US labor market may have dodged a bullet because whereas in March the labor market was almost demand constrained, when there were just 117K more openings than jobs in the US, since then the differential has risen and in May the number of job openings was 532K more than number of employed workers, suggesting the onset of a labor recession has once again been punted.

As noted previously, until this number turns negative - which it almost did but may have now averted for the foreseeable future - the US labor market is not demand constrained, and a recession has never started in a period when there were more job openings than unemployed workers.

Said otherwise, in May the number of job openings to unemployed rose for the first time in months, from 1.0x to 1.1x.

While the job openings data was a surprising big beat and continued rebound, there was some mixed news on the hiring side where the number of new hires dipped modestly to 5.503 million from 5.615 million, which was the highest in over a year, so hardly screaming collapse in the labor market. Meanwhile, the number of workers quitting their jobs - a sign of confidence in finding a better paying job elsewhere - rose modestly after dropping the previous month, and in May it grew to 3.293 million from 3.215 million.

How to make sense of this sudden improvement in the labor market?

Well it may have to do with the DOL starting to factor in the collapse in the shadow labor market - the one dominated by illegal aliens - and the replacement of illegals with legal, domestic workers. And since this will surely lead to higher wages, we doubt many Trump supporters will hate the development, even if it means an increase in inflation down the line.