2026-08-13 Thursday

The day's narrative is dominated by a strengthening El Niño, now with a 90% chance of a very strong event, which compounds the inflationary shock from the Middle East conflict. A Dallas Fed study shows zero short-run oil supply elasticity, implying that oil price spikes are more persistent and inflationary than previously thought. This is visible in the euro area, where inflation eased to 2.8% despite the energy shock, and in Africa, where the BIS reports heightened fiscal pressures from higher energy and fertiliser prices. Central banks are navigating these crosscurrents: the Bank of England finds that Mag-7 earnings shocks transmit globally, while the Fed compares private credit and leveraged loan markets, each $1.4 trillion. In Europe, German bond yields have risen sharply over the past year, and the Eurosystem has eased rates while shrinking its balance sheet. Meanwhile, the EU's monetary financing ban remains strict and unconditional, and the German government rejected UniCredit's share swap offer for Commerzbank, signalling caution on cross-border banking consolidation. Widely reported, several central banks held rates steady, and global inflation data for July show mixed signals, with Japan's PPI up 7.2% and Germany's CPI at 2.8%.