Reserve Bank of India (RBI) stated in its latest monthly update that in July, the global macroeconomic environment was largely shaped by trade tariff announcements and the continuing uncertainties on US import tariffs rates relating to some major economies and sectors. While the EU, South Korea and Japan have entered into trade deals with the US, steeper tariffs were levied on Brazil, Canada, India and Switzerland in August. Global uncertainty remained elevated in July on account of US tariff related uncertainty and geo- political tensions. The economic and trade policy uncertainty indices in the US have retreated from their all-time high levels in April, but the pace of decline has moderated somewhat.
Policy decisions by central banks continued to be driven by the growth-inflation dynamics in respective jurisdictions amidst uncertainties surrounding global trade policies. Major advanced economies largely kept policy rates unchanged in July owing to sticky core and services inflation. In August, the UK, Australia and New Zealand reduced their policy rates by 25 bps each Sweden held its key policy rate steady amidst high trade uncertainty. Amongst the EMDEs, Indonesia, Mexico and Thailand also reduced key policy rates by 25 bps each in August. China held its benchmark lending rate steady for the third consecutive month.