The inflation overhang

• The United States (US) economy grew an annualized 2.4% in the second quarter of 2023
  
• The European Central Bank (ECB) raised rates by 25 basis points (bps)in July
  
• Inflation eased in the United Kingdom (UK) in July
  

Economic activity in major developed countries was resilient in the second quarter of 2023. Real gross domestic product (GDP) growth in the US (annualized 2.4% vs 2.0%), euro zone (0.3% vs 0%), the UK (0.2% vs 0.1%), and Japan (annualized 6.0% vs 3.7%) accelerated on-quarter. However, growth in China, the largest developing economy, slowed to a seasonally adjusted 0.8% vs 2.2% on-quarter, as the country's recovery following lifting of Covid-19 restrictions remained uneven.

Meanwhile, differing inflation trends were seen last month. It eased in the euro zone and the UK, hardened in the US, and turned negative in China. But central banks in the key economies raised their policy rates further as inflation remained above their respective target bands.