Global news wrap: Monetary policies, G7 summit, climate warning

The 50th summit of the Group of Seven (G7) nations, held in Italy earlier this month, concluded with a strong stance against the Russia-Ukraine war. . (AP Photo/Domenico Stinellis) (AP)
The 50th summit of the Group of Seven (G7) nations, held in Italy earlier this month, concluded with a strong stance against the Russia-Ukraine war. . (AP Photo/Domenico Stinellis) (AP)

Summary

France and the UK are gearing up for national elections within the next two weeks, while rising temperatures around the world are adding to worries over the climate crisis.

Every month, Mint’s Plain Facts section brings out an update on key global data to thread together the biggest developments in the world that are worth paying attention to. The accompanying analysis and charts explain how each story is creating ripples on the global stage, where it is headed in the coming weeks, and whether it can impact India. This month we track the upcoming monetary policies, the G7 summit held in Italy, and how rising temperatures are ringing alarm bells.

1. Policy pivots

The monetary policies around the world are diverging, with the US Federal Reserve tilting towards a hawkish stance, while other countries have already started or are mulling interest rate cuts. To begin with, inflation in the UK finally reached the Bank of England’s aim of 2% in May but it has not materialized in a rate cut, yet. (There are expectations of one in August.) On the contrary, war-hit Russia, where inflation was as high as 8.3% in May, has signalled a rate hike in the upcoming meeting in July. Bank of Canada, which kickstarted the rate cuts this month, may hit a pause in the upcoming meeting in July. Indonesia's central bank, which delivered a surprise rate hike in April, may stay put in the upcoming meeting, while South Korea and Singapore, which are facing inflationary pressures, are also expected to keep interest rates unchanged at their meetings in July.

2. G7 and guests

The 50th summit of the Group of Seven (G7) nations, held in Italy earlier this month, concluded with a strong stance against the Russia-Ukraine war. The group extended its unwavering support for Ukraine, pledging financial aid through a $50-billion loan framework using interest from frozen Russian sovereign assets. The group also addressed unfair trade practices and global food insecurity, while China was cautioned about its alleged support for Russia's war. The highlight for India was the invitation extended to Prime Minister Narendra Modi as a guest to the summit. The G7 consists of developed countries—the US, the UK, Germany, Canada, Japan, Italy, and France, with a total gross domestic product worth $47 trillion and nearly 45% share in the world—but the presence of emerging economies as guests signals the group’s intention to bring more diversity to its summits. Apart from India, Brazil, Türkiye, and Argentina, among others, were also invited as guests.

3. Battleground 2024

From Mexico to India, Russia to South Africa, and Venezuela to Sudan, more than 60 countries have either concluded or will hold elections this year. With over 2 billion people choosing their leaders, the year 2024 holds a key year for human rights, economies, international relations, and peace prospects in an increasingly volatile world. While Vladimir Putin has won the election in Russia with a landslide, incumbent Narendra Modi in India has had to form a coalition government. France, which is set to vote starting next week, dominated the news after President Emmanuel Macron announced snap polls following a defeat for his party in the European Union elections. The UK's elections, scheduled on 4 July, will be closely watched, as Nigel Farage's Reform UK Party is giving a tough fight to Prime Minister Rishi Sunak's Conservatives. The next big election is in the US, scheduled in November, while several other countries will go to polls as well by December.

4. Dollar unplugged?

In response to a new wave of US sanctions aimed to cripple Russia’s war funding, the Moscow Exchange (MOEX) has halted the trading of US dollars and euros. The suspension means banks, companies and investors will no longer be able to trade either currency via a central exchange. Instead, they will be forced to use over-the-counter markets, which are generally less transparent and have wider bid-ask spreads, translating to higher transaction costs. The suspension marks an escalation in the ongoing economic friction between Russia and the West, and aligns with Russia's longer-term strategy of reducing reliance on Western currencies. Russia is actively promoting the Chinese yuan, which reportedly became the most traded currency on MOEX. Some other countries like Bolivia, Brazil and Argentina have also tried to reduce their dependence on the dollar by paying for trade in yuan. However, the dominance of the US dollar in global payments has increased compared to the pre-war period.

5. Burning up

The world is increasingly reaching the tipping point with climate change. Scientists at the World Meteorological Organization (WMO) warned earlier this month that there is an 80% chance that global temperatures will surpass the critical threshold of 1.5°C above pre-industrial levels in at least one of the next five years (2024-2028). Crossing this threshold would mean more frequent and intense heat waves, droughts, floods, and storms. Countries around the world have already recorded hotter-than-usual temperatures this year, which may impact agricultural activities and impact food prices. This may set a tough backdrop for the COP29 summit scheduled in November in Baku, Azerbaijan, ironically a country heavily reliant on fossil fuels. Some progress was made at the COP summit held last year, with countries agreeing to transition away from fossil fuels, which were targeted as the causes of the climate crisis for the first time.

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