International News 05/06

June 05, 2024 No. 87

South Korea's consumer inflation has slowed to its lowest level in 10 months.

South Korea's consumer inflation rate in May 2024 slowed down for the second consecutive month, reaching its lowest level in 10 months. The consumer price index (CPI) recorded a 2.7% inflation rate compared to the previous year, which was lower than both the 2.9% inflation rate in April and the 2.8% inflation rate that economists had forecast. This represents the slowest annual inflation rate since July 2024. On a monthly basis, the index increased by 0.1%, which is below the expected 0.2% increase. Despite stronger economic growth, the decrease in inflation is expected to continue throughout the year. Domestic demand is only expected to marginally recover. The Bank of Korea (BOK) is expected to reduce its policy rate by 50 basis points to 3.0% in the fourth quarter of 2024. The core CPI, which excludes volatile food and energy prices, increased by 2.2% year-on-year.

The Japanese yen is experiencing a decline in value, while Japan is spending approximately US$62 billion on intervention.

The Japanese government has allocated a record ¥9.8 trillion in market intervention funds to support the weakening yen, which fell to its lowest level in 34 years against the US dollar. This intervention exceeded expectations and set a monthly record, surpassing the total amount used in 2022 to stabilise the yen exchange rate. The government's resolve to counteract those betting against the yen is evident in these measures. Despite the significant amount of funds allocated for intervention, the total remains within the expected range. The yen's value against the dollar continued to decline, closing at 157.25. This trend is expected to persist due to the widening gap between interest rates of the Japanese and US central banks. The Bank of Japan has been actively involved in these intervention measures.

Fitch has revised its projections for Boeing's cash flow and aircraft delivery in 2024.

Fitch Ratings has revised its aircraft delivery and cash flow forecasts for 2024 due to ongoing investigations and a decline in production of its best-selling jet. The downgrade is partly attributed to the Civil Aviation Administration of China's decision to restrict the delivery of certain aircraft models to Chinese customers pending additional documentation on voice recorders and battery information. The revision also reflects the US Federal Aviation Administration's decision to maintain surveillance at Boeing factories while individually certifying newly manufactured aircraft. Boeing is currently rated BBB-minus, slightly above junk status, with a negative credit rating outlook. The rating is influenced by the significant decline in 737 MAX production. Despite this downgrade, Fitch and other ratings agencies do not expect it to result in a change in Boeing's rating. Moody's Ratings also noted that Boeing's recent announcement regarding negative free cash flow was unexpected.