In the Portuguese city of Sintra, the governors of the largest central banks came to their annual conference at the invitation of the European Central Bank. Yesterday was their panel discussion. Investors were curious about whether the data coming out there would provide new insights. But no Portuguese piri piri came to the financial markets. Markets shuddered for a moment when Fed Chairman Powell said it was possible to raise interest rates twice in a row, but markets quickly recovered after that. Europe closed significantly higher yesterday afternoon, and US markets closed almost unchanged overnight.
ECB’s Lagarde and BoE’s Bailey said they had little news and reserved their comments for their press conference after their recent policy meetings. New Bank of Japan Governor Kazuo Ueda said Japan’s highly accommodative policy will only tighten once there is clear evidence that inflation will rise again in 2024 after a period of moderation. With the exception of Japan, the conclusion might be that central banks are not done with slowing the economy by raising interest rates. The goal remains to contain what they believe is stubbornly high inflation. Powell doesn’t see the core inflation rate in the US falling below 2 percent until 2025. Remarkably, Sintra’s central bankers admitted they don’t really know how quickly their monetary policy will affect the economy, so there’s a chance They apply the brakes very firmly. Powell freely admitted that bringing inflation back to the 2 percent target would have a “social cost”. But also, if no action is taken, these costs can be many times higher. It is also remarkable that almost all bank governors are optimistic about the recession, which was announced months ago. Jerome Powell said that “a recession is not the most likely scenario for the US economy.” Lagarde also noted that a strong recession is not the ECB’s primary expectation.
By the way, if in July the European Central Bank decides to raise the main interest rate by another quarter of a percent, it will rise to 3.75 percent. This is equivalent to the rate applied from autumn 2000 to spring 2001 and is the highest rate in the history of the European Central Bank. So if another step is taken in September, and according to Lagarde, there is a chance, it will lead to a record level of interest for the ECB. Of course, the various individual national central banks in Europe, which implemented their own interest rate policy before the arrival of the ECB, applied higher interest rates.
Rio Tinto invests in copper production
The increased use of electricity and robotics in our society will increase the demand for copper. Energy transmission also contributes to this. This led Rio Tinto (LON:) to invest half a billion dollars in the Kennecott mine near Salt Lake City in the US. Production there will pick up next year, which is expected to produce an additional 250,000 tons of copper over the next 10 years. The mine in Utah is now still an open plan mine. With the investments, Rio Tinto also wants to go underground. Of course the investments will be made as sustainably as possible with all electrical equipment so that it is healthier and safer for the underground miners.
Rio Tinto has also announced that it wants to set up a battery test plant in Australia. The mining company wants to understand how the minerals might work for battery manufacturers. Rio Tinto expects high demand for lithium. Publicizing this intention, Kaufman, CEO of the Metals division said that lithium demand will increase fivefold through 2030. This will create a significant supply-demand gap after 2025. This is good news for our investment in the world’s largest lithium producer Albemarl.
