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Weekly Business News [May 25 Edition]

Britain’s annual inflation rate saw a sharp decline in April, dropping to 2.3% from March’s 3.2%, marking the lowest level in three years. But the decrease fell short of the expectations, tempering hopes for an interest rate cut by the Bank of England in June. This unexpected moderation in inflation suggests that the bank may maintain its cautious stance on monetary policy in the foreseeable future.

Speculation about potential adjustments to the Bank of Japan’s monetary easing policy has driven the key long-term interest rate to its highest level in 11 years. On Wednesday, the yield on the 10-year government bond briefly reached 1 percent, impacting housing and corporate loan rates. This marks the third consecutive day of rising long-term interest rates. The bank’s decision in March to end its negative interest rate policy and large-scale bond purchases has fueled market anticipation of further policy changes, which likely led to the surge in bond yields.

Some U.S. Federal Reserve officials indicated a readiness to raise interest rates if inflation becomes more aggressive, according to the last Federal Open Market Committee meeting. Despite recent cooler-than-expected inflation data, the meeting reflects persistent concerns about inflation. The Fed kept rates at a 23-year high of 5.25% to 5.5%. Officials suggested maintaining higher borrowing costs longer if inflation remains above the 2% target. Market expectations for rate cuts by the end of 2024 remained unchanged after the release of the meeting minutes.