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UK Budget Deficit Narrows In May

The UK budget deficit narrowed in May from the last year, data from the Office for National Statistics showed on Tuesday.

Public sector net borrowing decreased to GBP 24.33 billion in May from GBP 43.76 billion in the previous year. The deficit was also below the economists’ forecast of GBP 26.1 billion.

Nonetheless, this was the second highest May borrowing since records began in 1993.

In the financial year-to-May, PSNB was estimated at GBP 53.4 billion, the second-highest financial year-to-May borrowing since monthly records began in 1993 and was GBP 37.7 billion less than in the same period last year.

Excluding banks, public sector net debt came in at GBP 2,195.8 billion at the end of May, or around 99.2 percent of GDP, the highest ratio since the 99.5 percent recorded in March 1962.

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The Central Bank of Brazil Raises Key Interest Rate

Brazil’s central bank lifted its key interest rate by 75 basis points and signaled another rate hike of the same magnitude at the next meeting.

The monetary policy committee, known as Copom, unanimously decided to increase the Selic rate to 4.25 percent from 3.50 percent.

The bank has raised the rate by a cumulative 225 basis points so far this year. “The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022,” the bank said in a statement.

Policymakers viewed that the rate hike is necessary to mitigate the dissemination of the temporary shocks to inflation.

For the next meeting, the committee foresees the continuation of the monetary normalization process with another adjustment of the same magnitude.

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UK Inflation Exceeds 2% In May

UK consumer price inflation exceeded the central bank’s target in May, data released by the Office for National Statistics showed on Wednesday.

Consumer price inflation accelerated to 2.1 percent in May from 1.5 percent in April. This was above economists’ forecast of 1.8 percent and the Bank of England’s target of 2 percent.

Excluding volatile energy, food, alcoholic beverages and tobacco prices, core inflation rose to 2 percent in May from 1.3 percent in April. The rate was forecast to rise to 1.5 percent.

The monthly growth in consumer prices held steady at 0.6 percent, while it was forecast to ease to 0.3 percent.

Another report from the ONS showed that output price inflation came in at 4.6 percent versus 4.0 percent in April and economists’ forecast of 4.5 percent.

At the same time, input price inflation increased to 10.7 percent from 10.0 percent in April. This was the highest rate since September 2011 and above the expected rate of 10.6 percent.

Month-on-month, output prices gained 0.5 percent, slightly faster than the 0.4 percent rise seen in April. At the same time, input price growth slowed marginally to 1.1 percent from 1.2 percent.

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Japan’s GDP Contracts 3.9% On Year In Q1

Japan’s gross domestic product shrank an annualized 3.9 percent on year in the first quarter of 2021, the Cabinet Office said in Tuesday’s final reading.

That exceeded expectations for a decline of 4.8 percent following the 11.7 percent surge in the three months prior.

On a quarterly basis, GDP was down 1.0 percent – again beating forecasts for a decline of 1,2 percent following the 2.8 percent increase in the previous three months.

Capital expenditure was down 1.2 percent on quarter, matching expectations following the 4.3 percent gain in the previous quarter.

External demand was down 0.2 percent on quarter after rising 1.1 percent in the previous three months, while private consumption dropped 1.5 percent on quarter after gaining 2.2 percent three months earlier.

The GDP price index was down 0.1 percent on year after rising 0.2 percent in the three months prior.

Also on Tuesday:

• The Ministry of Finance said that Japan posted a current account surplus of 1,321.8 billion yen in April. That missed expectations for a surplus of 1,500.6 billion yen following the 2,650.1 billion yen surplus in March.

Exports were up 38.0 percent on year at 6,825.5 billion yen and imports gained an annual 11.3 percent at 6,536.0 billion yen for a trade surplus of 289.5 billion yen.

\The capital account showed a surplus of 3.4 billion yen, while the financial account saw a shortfall of 242.7 billion yen.

The Bank of Japan said that overall bank lending in Japan was up 2.9 percent on year in May, standing at 578.366 trillion yen. That follows the 4.8 percent increase in April.

Excluding trusts, bank lending gained an annual 2.2 percent to 501.954 trillion yen, slowing from the 4.3 percent expansion in the previous month.

Lending from trusts climbed 7.5 percent on year to 76.411 trillion yen after rising 8.3 percent a month earlier. Lending from foreign banks rose 2.5 percent on year to 3.381 trillion yen, up from 1.2 percent in April.

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India’s Central Bank Holds Key Rates As Expected

India’s central bank decided to keep its key interest rates unchanged and to continue with its accommodative stance as long as necessary.

At the end of three-day rate setting meeting, the Monetary Policy Committee of the Reserve Bank of India unanimously voted to hold the benchmark policy rate at 4.00 percent. The reverse repo rate was retained at 3.35 percent.

The Marginal Standing Facility rate and the Bank Rate were also left unchanged at 4.25 percent at the meeting.

Also, the committee unanimously decided to continue with accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

The central bank forecast the real GDP to grow 9.5 percent in the financial year 2021-22. Consumer price inflation inflation was projected at 5.1 percent during 2021-22.

Governor Shaktikanta Das unveiled additional steps to mitigate the adverse impact of the second wave of the pandemic. He announced a separate liquidity window of INR 150 billion to certain contact-intensive sectors.

Under the scheme, banks can provide fresh lending support to hotels and restaurants, tourism, aviation ancillary services, and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organizers, spa clinics, and beauty parlours/saloons.