2026-08-18 Tuesday

Federal Reserve Governor Lisa Cook said US inflation remains stubbornly high, with PCE prices up 3.7% year-over-year in June, nearly double the FOMC's 2% target, and she is prepared to raise rates if necessary. The balance of risks has shifted toward inflation, she argued, despite a stable labor market with unemployment at 4.2% and job growth averaging over 100,000 per month in Q2. Cook identified AI-related investment and Middle East conflict as unexpected price pressures, while noting that business investment rose at a 10% annual rate in H1 2026, partly driven by AI. This hawkish stance from a Fed governor suggests the policy rate could move higher, affecting bond yields and the cost of funding for public finance entities. Cook cautioned against over-weighting a single data point, but her explicit readiness to hike marks a deviation from the prior wait-and-see stance, potentially tightening financial conditions.

Singapore's economy grew 6% year-on-year in H1 2026, up from 5% in H2 2025, driven by strong technology-related sectors, while core inflation rose to 1.4-1.5% in Q1-Q2 2026 from below 1.0% in 2025. The Monetary Authority of Singapore tightened monetary policy in April and again in July to counter imported inflationary pressures, projecting inflation to average 1.5-2.5% in 2026 and stay elevated into H1 2027. MAS reported a net profit of S$20.0 billion for FY2025/26, driven by investment gains of S$39.8 billion. AI-driven electronics exports account for over 70% of Asia's export growth year-to-date, up from 46% in 2024, but risks to AI investment sustainability—including energy costs and supply bottlenecks—could lead to a retrenchment. The tightening cycle and AI-driven growth affect regional bond yields and the Singapore dollar, influencing funding costs for public finance in the region.

South African Reserve Bank Governor Lesetja Kganyago reported six consecutive quarters of expansion, the longest since 2018, and noted the formal adoption of a 3% inflation target (±1 pp) in 2025, replacing the 3-6% range. An oil shock pushed headline inflation to 5% in June, prompting a rate hike to 7% in May, while long-term borrowing costs have fallen over 300 basis points and FX reserves grew to $74 billion, easing fiscal pressure.

Bank of Greece Governor Yannis Stournaras highlighted that the US-Iran agreement reduced energy prices, with euro area inflation falling to 2.8% in June 2026 from 3.2% in May, but renewed hostilities have created new pressures. Greece's strong bank turnaround (capital adequacy ~20%, NPL ratio 3.4%) and the highest RRF allocation as a share of GDP, with contracted loans reaching €13.2 billion and a disbursement rate of ~68.5%, underscore the need for Europe to mobilize private savings and complete the Banking Union.

China's January-July 2026 data show industrial output up 5.3% and retail sales up 1.2%, but fixed asset investment down 6.7% and real estate investment down 19.2%, with exports up 14.0% and imports up 22.0%. Taiwan's Q2 2026 GDP grew 12.93% year-on-year, with a 2026 forecast of 11.05% and July CPI up 2.54%, while PPI surged 16.94%. China's July coal production fell 10.1% to 340 million tonnes, while crude oil rose 0.8% and natural gas fell 0.9%, with thermal power down 3.5% but renewables growing.

The ECB's blog argues that AI-driven stock market valuations are likely to face a correction, as historical tech booms often end in busts; even if AI proves transformative, the shift from diversifiable to economy-wide risk raises the risk premium, leading to price declines. Euro area households hold around €440 billion in US tech equities via funds, and a US correction would likely spill over due to high market correlation, transmitting shocks to euro area financial conditions and potentially complicating the ECB's inflation fight.

Research from the National Bank of Slovakia using firm data from 2013-2023 shows a one-degree Celsius increase in average summer temperature cuts revenues by nearly seven percentage points in heat-sensitive sectors—agriculture, construction, transport, and manufacturing—which together generate about 40% of the country's value added. Firms respond by cutting costs and taking short-term loans rather than investing in adaptation, implying hotter summers could weaken corporate balance sheets and raise credit risk in these sectors. The finding appears in an NBS working paper; a follow-up quantifying the loan-loss impact on Slovak banks would settle its significance for financial stability.

Waterborne shipments of crude and petroleum products from the U.S. Gulf Coast to the West Coast more than quadrupled year-on-year in April and May after a Jones Act waiver, reaching 190,000 barrels per day in April versus under 30,000 b/d in January and February. Gulf-to-East Coast shipments hit a record 1.2 million b/d, with record highs for gasoline blending components and distillate fuel. The waiver eases a shipping constraint that typically forces West Coast refiners to rely on more expensive sources, potentially narrowing regional fuel price differentials and affecting import demand. The data hides in the EIA's weekly petroleum status report; a sustained rise above 200,000 b/d for two consecutive months would confirm a structural shift.

Hong Kong's SFC reported a 13% growth in assets under management to $35.1 trillion and record Stock Connect southbound net inflows of $1.19 trillion. Argentina's CNV issued over 110 resolutions in two years, including for virtual asset service providers, and avoided the FATF grey list. Finland raised the loan-to-value cap to 95%, while the UK FCA proposes removing the 7-day IPO research delay. Switzerland updated Russia sanctions, and the SEC charged Andrew Spaventa in a $74 million pre-IPO scam.

Bank of France First Deputy Governor Denis Beau told the CCP Global Annual Meeting 2026 that non-bank financial institutions now account for over 40% of non-centrally cleared euro repo transactions, up from less than 30% at end-2020, while sponsored clearing models represent only 5.8% of total repo transactions in Europe. He warned that greater NBFI participation may amplify procyclical dynamics during stress and that concentration in critical infrastructures and cyber threats are rising. The Eurosystem's wholesale CBDC rollout is scheduled for autumn 2026, and the European Commission's December 2025 Market Integration Package proposes centralising supervision of significant CCPs under ESMA. The speech was published on the BIS website; a settlement would be the ECB's confirmation of the CBDC launch date or ESMA's adoption of the supervision proposal.