| Hello. Today we look at what New Zealand's interest-rate cycle tells us about the world, Saudi Arabia's efforts to modernize its economy and ongoing property pain in China. New Zealand has a knack for leading the global policy cycle. Thirty years ago it pioneered inflation targeting. And its status as a small, open, trade-reliant economy means it often reacts to growth trends quickly, making it the "canary in the coal mine" for the global economy. And the canary is coughing, as Matthew Brockett and Enda Curran report. The Reserve Bank of New Zealand was one of the first among developed nations to begin withdrawing pandemic stimulus last year and its decision to accelerate the pace of rate increases this year foreshadowed what would come from counterparts in the US, Australia and Canada. So the reaction to those hikes bears watching for clues to how others may react to the tightening. And the impact has been swift: Business confidence has slumped and house prices are falling, suffering their biggest quarterly drop since 2009 in the three months through June. Already, markets are betting the deterioration means the central bank won't be able to deliver on its hawkish bets. In May, the RBNZ projected that the Official Cash Rate would climb to 3.95% in the third quarter of 2023, implying a 4% peak, with modest rate cuts beginning in mid-2024. Most local economists don't see the OCR rising above 3.5%, and some see policy being eased again from late 2023. All economists in a Bloomberg survey expect the RBNZ to lift the OCR to 2.5% from 2% on July 13. "After the RBNZ slammed the brakes, the first skid marks have appeared on New Zealand's economic road," said Frederic Neumann, co-head of Asian economics research at HSBC Holdings. "The contours of a shift in direction are becoming faintly visible in the distance. The signs are thus pointing towards a broader let-up in monetary tightening elsewhere."
—Malcolm Scott As Crown Prince Mohammed bin Salman races to diversify Saudi Arabia's oil-dependent economy, the $620 billion Public Investment Fund — which he chairs — is taking center stage. Receding is the conservative Islamic kingdom of old, which lived off its oil revenues while cautiously investing in safe US treasuries and disbursing lucrative state contracts. This is Saudi Inc. And its self-styled founder is ripping up the rule book. In the space of five years, the PIF's become a major international investor, snapping up US blue chips like Uber and investing in electric cars. It's also made forays into sports, buying UK soccer team Newcastle United and investing $200 million in an international golf venture. That's given MBS, as the de facto ruler is known, more clout on the international stage, with Western officials looking to the world's biggest oil exporter to help temper raging inflation and pour petrodollars into a sputtering world economy. US President Joe Biden will visit Riyadh mid-July, forced to rethink his promise to turn MBS into a "pariah" over the 2018 murder of Washington Post columnist Jamal Khashoggi. Read more here  | - Johnson quits | The UK will be seeking a new prime minister to oversee a country witnessing its worst cost-of-living crisis in a generation as Boris Johnson plans to stand down.
- Fed minutes | Federal Reserve officials solidified their resolve in June to keep raising rates for longer to prevent higher inflation from becoming entrenched, even if that slowed the US economy.
- ECB tool | European Central Bank policy makers have a working name for their new crisis tool but aren't yet displaying certainty that it will be ready at their July 21 decision, sources say.
- China challenged | China is mulling $220 billion of stimulus with unprecedented bond sales. Signs are also mounting the economy shrank in the second quarter, placing official statistics under fresh scrutiny as analysts bet the government will avoid acknowledging the slump.
- Central bank hikes | Sri Lanka raised borrowing costs to rein in Asia's fastest inflation, Sierra Leone hiked by 100 basis points and Serbia increased for a fourth month. Peru is set to move to the highest since 2009 and Poland may boost its key rate for a 10th straight time.
- Japan prices | The Bank of Japan is likely to consider revising its inflation and growth forecasts later this month. Prime Minister Fumio Kishida is also betting that older voters will look past surging prices in a crucial election on Sunday.
- Jobs slowdown | US employers are forecast to have added the fewest jobs in over a year in June, but economists say that slowdown isn't concerning at least not yet.
- Mexico beer | Mexican beer sellers who've struggled through bottle and can shortages are facing a new challenge keeping their shelves stocked: robust demand.
Goldman Sachs economists have been looking at how severe recessions as they peg the risk of downturns in the next year at 30% in the US and 40% in the euro area. Analyzing 77 such slumps in advanced countries since 1961, the economists found that unemployment rates have tended to rise by a median of 2.7 percentage points, with larger increases in the 1980s Countries with bigger gains in unemployment also seemed to have less frequent recessions — including the UK, Netherlands, and Sweden. In contrast, countries with smaller increases in the unemployment rate tend to have more frequent recessions, such as Germany, Italy, and Japan. Central Bank Digital Currencies are catching on: Read more reactions on Twitter | 
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