Endless Wars, Chinese Data Reports, More Testimony from Warsh, and an Upcoming Canadian Interest Rate Announcement
July 15, 2026
The twin wars between Russia and Ukraine and over the Strait of Hormuz are escalating and remain stalemated. The price of WTI oil is around $80 per barrel and 0.8% higher than yesterday. Fed Chairman Kevin Warsh will be reprising yesterday’s congressional testimony, this time before the Senate Banking Committee. Unlike earlier this decade, he aims to rid any thought that it’s okay to tolerate a patch of above-target inflation following a patch that was below target. This view restores the traditional thinking that an identified 2% definition of price stability ought to be considered a ceiling, not a mid-point, and it implicitly prioritizes the mandate for inflation above that for employment. His 100% confidence that the central bank has the wherewithal to meet its price stability obligation is inspiring but also overly simplistic.
If the outcome of U.S. monetary policy on American inflation is entirely in the hands of the Federal Reserve at all times, how does one explain the confluence of similar inflationary trends — most peaking in the second half of 2022 and running out of steam two years later? Does the Fed control what happens to global inflation, or maybe many monetary authorities simply were guilty of the same over-complacency when inflation started to rise in 2021? More likely, the reality is that inflation is affected by the interconnectedness of the world economy to a greater extent than Warsh seems to believe. In any case, the chairman caught a break yesterday from lower-than-forecast U.S. June consumer price figures, and today’s PPI may perhaps do so as well because June captures the U.S.-Iranian ceasefire that has subsequently fallen apart.
In financial markets overnight and prior to the PPI release, the dollar and U.S. stock futures was marking time. Ten-year sovereign debt yields, however, had risen by two basis points in the United States, Britain and Japan and even more in Euroland. Stock markets closed with gains over more than a percent in South Korea, Taiwan, and Japan but were down in Europe. Gold had lost ground, but crypto was higher.
The PPI release did undershoot street expectations substantially in the overall 3-month low of 5.5%. PPI inflation had printed at 6.0% in May and was expected to edge upward to about 6.3%. When excluding food and energy, the core PPI inflation pace of 4.7% was a half percentage point below expectations but at 4.7% exceeded May’s reading of 4.6%. When excluding traded items as well, PPI inflation held steady at 5.1%, its highest level since October 2022. A great deal of attention in this report will no doubt gravitate to the 0.3% month-on-month decline, which represents the largest drop in 14 months. A 12% plunge in petrol costs had a lot to do with that.
In a flood of Chinese data releases this Wednesday, the most notable item involved second-quarter real GDP whose 0.9% upturn was the smallest in eight quarter and resulted in a 14-quarter low year-on-year growth rate of 4.3%. Analysts had projected a slightly higher year-on-year comparison, and the 4.7% pace experienced in the first half of 2026 accordingly undershot the government goal as well as the 5.0% full-year growth rates in both 2024 and 2025, not to mention 5.4% in 2023. Housing and personal consumption continued their recent woes, and the trade climate suffered from the Middle Eastern war and erratic tariff uncertainties.
Other Chinese data releases included
- Stronger-than-expected June retail sales, up 0.4% on month and 1.0% on year. First-half sales were 1.3% above a year earlier.
- Stronger-than-forecast industrial production, up 0.8% m/m, up 5.3% y/y and +5.4% in the first half of the year.
- A 5.7% on-year plunge in fixed asset investment during January-June exceeded drops of -4.1% in January-May and 3.8% in 2025. Investment in the property sector was a whopping 18% lower than a year earlier. House prices were down 3.3% on year.
- Chinese unemployment edged downward to 5.0% last month, lowest in a year.
Japan reported a much worse-than-expected 12.4% monthly dive in core machinery orders during May, which caused their year-on-year change to swing from +15.6% in April to negative 1.9%. A better picture was depicted by Japan’s tertiary index of the perceived economic conditions among service sector workers. This barometer umped 1.4% on month and 1.5% on year in May.
In several economies preliminary consumer price inflation estimates were left unaltered in final releases. Spain‘s CPI rose 0.6% on month and 3.2% on year. It was also 3.2% in April and May but had fallen previously from a peak of 10.8% in July 2022 to 1.5% in April 2024. In Sweden, consumer prices last month rose 0.4% with a year-on-year reading of 0.7% after May’s 7-month high of 0.8%. Slovakian consumer price inflation had slowed from 15.4% in February 2023 to 2.1% by mid-2024 but had a reading last month of 3.5%. Polish CPI inflation of 2.5% last month represented a 4-month low. Such was far beneath the 18.4% peak in February 2023 but above 2.0% seen in March 2024. A four-month low in Bulgarian CPI inflation last month was up from 1.2% in September 2024 but well below the 18.7% zenith touched in September 2022. Croatian consumer prices slipped 0.4% on month and to a 4-month low of 4.5% in year-on-year terms, closer to its 1.6% low in September 2024 than its high in November 2022 of 18.4%. Overall and core CPI inflation readings in Norway of the same 2.7% in June represented 4- and 17-month lows.
Industrial production in the euro area unexpectedly fell during May by 0.2%. This was associated with a 12-month 1.2% rate of decline that was more than twice the expected slide. Nonetheless, April-May combined output still exceeded the first quarter mean by 0.5%.
The jobless rate in India has risen from 4.7% last November to 5.5% last month.
The U.S. release late yesterday of Treasury-compiled capital movements in May showing a net long-term capital inflation of $282 billion and an overall capital inflow of $183 billion dovetails with anecdotal evidence of safe haven-seeking flows amid wartime geopolitical uncertainty and the elevation of global oil prices.
The Bank of Canada’s interest rate announcement due shortly is not expected to change the 2.25% policy rate level.
Copyright 2026, Larry Greenberg. All rights reserved.
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