Every month, Plain Facts brings you an update on key global data to thread together all the developments worth paying attention to. The accompanying analysis and charts explain how each story is creating ripples, where it is headed in the coming weeks, and whether it could affect India.
This month we track upcoming monetary policy announcements, what’s causing the US market to move in a hot political climate, and the impact of the CrowdStrike outage.
1. Will rates be cut?
With inflation easing in several countries, expectations of rate cuts have grown, and some countries have already embarked on that journey. In the next few days, the US, the UK, India, Japan, Indonesia, and others will announce their monetary policies. The US Federal Reserve, the benchmark for monetary policies worldwide, is expected to keep interest rates unchanged on 31 July but cut rates in September. In the UK, recent data on stubbornly high services inflation has dimmed expectations of a rate cut.
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India is also expected to keep the policy rate unchanged owing to food price uncertainty. Indonesia may maintain the status quo until the last quarter of the year to strengthen its currency and attract inflows. Japan, which is in a completely different situation, may leave rates unchanged, but there’s also a chance of a hike since inflation remains above the 2% target.2. What shook the US market?
The US has seen extreme political chaos over the past month. Republican presidential nominee Donald Trump survived an assassination attempt while President Joe Biden withdrew from the race over concerns about his age and health. The US market, however, remained unfazed. It inched up slightly after the Trump assassination attempt but was unperturbed by Biden’s exit as it had already been priced in. That’s not to say that the US markets have been calm, but the turmoil has been due to other reasons.
On 17 July, the S&P 500 shed 1.4% as semiconductor stocks fell on the news that the government may impose stricter trade rules for Chinese chipmakers.
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The S&P 500 shed another 2.3% on 24 July after Tesla and Alphabet reported disappointing earnings. On the political front, investors have been betting on Trump to return by selling long-term US bonds and buying Bitcoin.3. Taxing the super-rich
With rising incomes becoming a global problem, G20 nations have been forced to consider fair taxation of the ultra-high-net-worth individuals. According to a report by Reuters, G20 finance leaders have vowed to cooperate on taxing these effectively, both a joint communiqué and a separate declaration on international tax cooperation last week.
Amid a global outcry over income inequality, a report predicted that Taiwan and Türkiye would see the fastest growth in the number of millionaires from 2023 to 2028 among 32 nations for which the data was provided. Türkiye saw a 157% increase in wealth per adult between 2022 and 2023, leaving all other countries far behind, the Global Wealth Report by UBS noted. Of the countries expected to see the fastest growth in the number of millionaires, Japan and South Korea are the only ones that already have more than one million millionaires.
4. Cost of the CrowdStrike outage
On 19 July, a software update from global cybersecurity firm CrowdStrike caused a massive outage that affected nearly 8.5 million Microsoft devices worldwide. The disruption caused at least 5,078 flights to be grounded, broadcasts to be halted, and left millions unable to access essential services such as healthcare and banking.
According to reports, the financial cost of the outage is estimated to be $10 billion, while top 500 US companies, excluding Microsoft, suffered losses of nearly $5.4 billion.
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However, many countries reported minimal damage. In India, the aviation sector was hit hardest as hundreds of flights were delayed or canceled, while the Bombay Stock Exchange was not affected.5. Debt eats into investments
High levels of debt have always been a concern worldwide, and the problem was exacerbated when covid-19 disrupted the global economy. Several countries raised debt to support their economies at the time but haven’t managed to return to pre-pandemic levels yet. The debt crisis has sparked several warnings from international agencies such as the World Bank and the International Monetary Fund.
While debt levels are high in developed countries as well, developing countries face a spending crunch owing to large interest obligations. According to a report by the campaign group Debt Relief International for Norwegian Church Aid, more than 100 countries are cutting back on investments in education, health, social protection, and climate change remedies as they have large debt payments to make. In 2024, debt servicing will absorb 41.5% of budget revenues, 41.6% of spending, and 8.4% of GDP on average across 144 developing countries, the report noted.
