Last week we saw the Bank of England’s policy vote with all nine Bank of England policymakers voting to hold interest rates at 0.5% in July. There was however signs some Monetary Policy Committee members are edging closer to backing a rate rise. The turmoil around the Greece debt talks is playing a key factor in voting to hold rates. Economists said three of the MPC's nine members might vote for a rate hike in August, getting the ball rolling for a majority to back an increase later this year or in early 2016. Overall it is suggested that a hike may come around towards the end of the year.
UK government borrowing fell to £9.4bn in June, down £0.8bn from a year earlier, as income and corporation tax receipts rose to record levels. Income tax receipts rose to £11.5bn, while corporation tax brought in £1.7bn, both record monthly highs.
It was lowest borrowing figure for June since 2008, However, analysts had been expecting it to drop further to £8.5bn.In the financial year so far, borrowing has fallen by £6.1bn to £25.1bn. Public sector net debt at the end of June 2015 was £1.513 trillion, or 81.5% of annual UK economic output, up from 80.8% in May.
Also in the UK it was reported, House prices are rising rapidly in the north east of England and falling fast in Kensington and Chelsea, according to property website Rightmove, in a remarkable reversal of the trend over the past decade. In the London borough of Kensington and Chelsea, the average asking price for a property fell by more than £178,000 to £2.29m during July, a decline of 7.2%. But in the north-east, prices rose by 2.1% over the month, to £147,251. The region recorded the biggest rise in asking prices of any part of the UK.
In the US Figures showed that U.S. existing home sales hit the highest level since 2007 in June added to expectations for the Federal Reserve to raise interest rates in the coming months. The National Association of Realtors reported that U.S existing home sales increased by 3.2% to 5.49 million units last month from 5.32 million in May. Home sales were expected to rise 1.2% to 5.40 million units in June.
A top Fed official told reporters there is a better than 50 percent chance that the Federal Reserve will raise interest rates in September. St. Louis Fed President James Bullard stated that the Fed should get ahead of the curve, as inflation will rise and labour market slack will end.
U.S. consumer prices rose for a fifth straight month in June as the cost of gasoline and a range of other goods increased, further signs of firming inflation that strengthen the case for an interest rate hike this year.
The Consumer Price Index rose 0.3 percent last month after increasing 0.4 percent in May. Last month's increase pushed the year-on-year CPI rate into positive territory for the first time since December. The energy-driven disinflationary trend appears to have run its course, with producer prices rising in June for a second straight month.
In Europe, The euro remained vulnerable as the Greek parliament was set to vote on a second set of reforms needed to secure the country's bailout deal. The European Central Bank (ECB) is said to have increased its cash lifeline to Greek banks by €900m (£630m) just hours before the vote started. The ECB has reportedly offered more help to Greece's struggling banks through Emergency Liquidity Assistance (ELA). If lawmakers agree to the financial reforms, Greece will be able to press ahead with negotiations for an €86 billion bailout from its creditors. Greece's next major deadline is August 20, when it must pay €3.2 billion owed to the European Central Bank, followed by a payment of €1.5 billion to the International Monetary Fund in September.
The International Monetary Fund (IMF) has confirmed that Greece has cleared overdue debt repayments of €2.05bn (£1.4bn) and is no longer in arrears.
Greece reopened its banks and ordered billions of euros owed to international creditors to be repaid in the first signs of a return to a normal way of life. Increases in value added tax agreed under the bailout terms also took effect, with VAT on processed food and public transport jumping to 23 percent from 13 percent.
However stock market remained closed until further notice. Limits on withdrawals will remain at 420 euros per week instead of 60 euros per day as well as payments and wire transfers abroad will still not be possible. Greece initiated a payment of 4.2 billion euros in principal and interest to the European Central Bank due on Monday after European authorities agreed last week to provide emergency funding assistance. It is also paid 2.05 billion euros to the International Monetary Fund in arrears since June 30.
