persistent depreciation of the euro against the US dollar

The Board of the Reserve Bank of Australia decided to increase the cash rate target by 50 basis points to 1.35 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent. Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries.

Inflation is forecast to peak later this year and then decline back towards the 2–3 per cent range next year. As global supply-side problems continue to ease and commodity prices stabilize, even if at a high level, inflation is expected to moderate. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services. Medium-term inflation expectations remain well anchored and it is important that this remains the case. A full set of updated forecasts will be published next month following the release of the June quarter CPI.

On account of the European Central Bank monetary policy meeting the marked and persistent depreciation of the euro against the US dollar, the currency in which oil imports were predominately invoiced, had tangible and immediate effects on inflation, and therefore on inflation expectations. Since May 2021, oil prices had increased by 88% in US dollar terms but by 111% in euro terms. At the same time, the ECB’s communication since the start of the year had provided a counterweight to the downward pressure on the euro that had resulted primarily from the forceful action of the Federal Reserve System.

All in all, the outlook for inflation and hence for monetary policy would remain a key driver of asset prices for the foreseeable future. In this context, higher volatility was a natural reflection of price discovery in an environment in which central banks found it harder to provide clear forward guidance given the uncertainty around the policy outlook.

In Canada employment fell by 43,000 (-0.2%) in June, fully offsetting the increase of 40,000 recorded in May.

The number of self-employed workers fell by 59,000 (-2.2%), while the number of employees held steady in both the public and the private sectors.

Employment in the services-producing sector declined by 76,000 (-0.5%) in June, with losses spread across several industries, including retail trade.

In the goods-producing sector, employment rose by 33,000 (+0.8%) in June, with gains in construction and manufacturing. Total hours worked increased 1.3% in June.

Average hourly wages rose 5.2% (+$1.54 to $31.24) on a year-over-year basis in June, up from 3.9% in May.

The unemployment rate reached a new low of 4.9% in June, and the participation rate fell 0.4 percentage points to 64.9%.

The adjusted unemployment rate—which includes people who were not in the labour force but wanted to work—decreased 0.2 percentage points to 6.8% in June, the second consecutive record low. Long-term unemployment stood at 185,000 in June.

According to the US Bureau of Labor Statistics total nonfarm payroll employment rose by 372,000 in June, and the unemployment rate

remained at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable

job gains occurred in professional and business services, leisure and hospitality,

and health care.

The unemployment rate was 3.6 percent for the fourth month in a row, and the number

of unemployed persons was essentially unchanged at 5.9 million in June. These measures

are little different from their values in February 2020 (3.5 percent and 5.7 million,