International News 31 July 2026
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Bank of England Holds Rates as More Policymakers Back Tightening
The Bank of England (BoE) kept its benchmark interest rate unchanged at 3.75% on Thursday, but support for a rate hike grew as policymakers weighed rising inflation risks stemming from renewed tensions between the United States and Iran. According to Reuters, the BoE's Monetary Policy Committee (MPC) voted 6-3 to hold rates, compared with economists' expectations of a 7-2 split. MPC member Catherine Mann joined Megan Greene and Chief Economist Huw Pill in voting for a 25-basis-point increase to 4.0%, while the remaining six members favored keeping policy unchanged under Governor Andrew Bailey's "wait-and-see" approach. Bailey said maintaining current rates was appropriate given growing global uncertainty and the risk that geopolitical tensions could fuel inflation, while domestic conditions remained broadly consistent with the inflation outlook. Following the decision, the British pound edged lower against the U.S. dollar, while the yield on two-year UK government bonds fell by around 2 basis points. Schroders Senior Economist George Brown said most MPC members remain unconvinced that higher energy prices will translate into more persistent domestic inflation, reinforcing the committee's cautious stance.
U.S. June PCE Inflation Eases, but Rising Oil Prices Cloud Outlook
U.S. inflation slowed in June 2026, although the improvement is expected to be temporary as renewed tensions in the Middle East push global oil prices higher. According to Reuters, the Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve's preferred inflation gauge—rose 3.7% year-on-year in June, down from 4.1% in May, which had marked the highest reading since April 2023. The figure matched economists' expectations. On a monthly basis, headline PCE fell 0.1% after rising 0.5% in May, marking its first monthly decline since April 2020. The moderation in inflation was largely driven by lower oil prices during the fragile ceasefire between the United States and Iran. However, that relief has since faded as the conflict reignited, with Brent crude remaining above US$90 per barrel and the average U.S. gasoline price climbing back above US$4 per gallon. Excluding volatile food and energy prices, core PCE inflation eased to 3.3% year-on-year from 3.4% in May, while monthly core inflation slowed to 0.1% from 0.3%, suggesting underlying price pressures have moderated but remain above the Federal Reserve's target.
U.S. 30-Year Treasury Yield Hits 19-Year High as Markets Assess Fed and AI Outlook
The yield on the 30-year U.S. Treasury climbed to its highest level since 2007 on Thursday, while global equity markets attempted to recover on optimism that heavy investment in artificial intelligence (AI) is beginning to generate results. The 30-year Treasury yield briefly reached 5.239%, its highest level in 19 years, after the Federal Reserve kept interest rates unchanged. However, Federal Reserve Chair Kevin Warsh delivered mixed signals on the outlook for monetary policy and inflation, leaving investors uncertain about the central bank's next move. Market uncertainty has intensified as Warsh scaled back the Fed's use of forward guidance, making future policy decisions harder to predict. At the same time, investors continued to reduce exposure to AI-related stocks that had previously driven the market rally. South Korea's KOSPI index fell 1.23%, marking its third consecutive daily decline. Sanjiv Tumkur, Head of Equity Research at Rathbones, said the long-term AI investment story remains intact, but warned that investors should expect continued volatility along the way.