※[Global Morning Briefing] summarizes global news delivered by Seoul Economic Daily.
A surge in energy prices triggered by the U.S.-Iran war is fueling inflation worldwide, prompting major central banks to shift toward tightening one after another.
The European Central Bank (ECB) raised its benchmark interest rate by 25 basis points at its monetary policy meeting Wednesday. The move marks the first rate hike in about two years and nine months since September 2023, prompted by the eurozone's April consumer price growth of 3.2%, far exceeding its target of 2%, and an energy price surge of 10.9% from a year earlier. As a result, the deposit rate rose to 2.25%, the main refinancing rate to 2.40%, and the marginal lending rate to 2.65%.
The Bank of Japan is expected to raise its benchmark rate from 0.75% to 1.0% at its meeting on the 16th, entering the 1% range for the first time in more than 30 years. Australia has already raised rates three times this year, and an additional hike in August is seen as likely.
The U.S. Federal Reserve has shifted its stance from a rate cut within the year to holding rates steady. The shift reflects intensifying inflation, with the U.S. CPI rising 4.2% year-on-year in May, the highest in three years and one month. The May Producer Price Index (PPI) also rose 6.5% from a year earlier, exceeding both the previous reading of 6.0% and the forecast of 6.4%. Solid employment is another factor lowering the likelihood of a rate cut, with U.S. nonfarm payrolls in May totaling 172,000, more than double the forecast.
Trump Again Vows "Powerful Strike Tonight"...Iran, Closing Hormuz, Threatens to "Make It Hell"
The United States and Iran exchanged large-scale attacks around the Strait of Hormuz for a second day, marking the biggest clash since the ceasefire.
President Trump wrote on Truth Social Wednesday: "The United States will strike Iran powerfully tonight." He added, "Before long, we will seize Kharg Island and other oil infrastructure, and completely take over Iran's oil and gas market, just as in Venezuela." The previous night, the U.S. launched a massive attack with 49 Tomahawk missiles, but when Iran responded with a counterattack, Trump escalated.
Earlier, the U.S. struck Iran's air defense and radar facilities with Tomahawk missiles, and Iran attacked 18 U.S. military bases in the Gulf region, including the U.S. Navy's Fifth Fleet base in Bahrain and a U.S. Air Force base in northern Iraq, with missiles and drones. Iran's Revolutionary Guards declared a re-blockade of the Strait of Hormuz, warning, "We will make this place hell," and actually opened fire on two ships that violated the passage ban.
Even under these circumstances, the two sides are reportedly continuing negotiations, but Trump's mention of resuming attacks has complicated the situation again. Reuters, citing Iranian sources Wednesday, reported that "the two countries have reached the stage of political understanding on a memorandum of understanding (MOU)," adding that "some matters, including the release of tens of billions of dollars in frozen Iranian assets, still require detailed discussion." Tasnim, however, drew a line, calling the negotiations "groundless."
OpenAI Weighs Price Cuts to Counter Anthropic...Is an AI Industry Price War Beginning?
OpenAI is considering a plan to sharply cut the token prices of its AI services to win corporate customers in the face of Anthropic, which is preparing for an IPO. The move is intended to preemptively block Anthropic from making a similar price cut, and the recent emergence of token cost burdens as a point of contention among companies also played a role as a backdrop.
However, there are concerns that price-cutting competition could further worsen the profitability of both companies, which are already posting large losses. Anthropic is aiming for its first profit around 2028, while OpenAI is expected to invest 121 billion dollars in computing costs alone in 2028, with a loss of 85 billion dollars projected for that year alone. Anthropic currently holds the edge in profitability.
Another risk that concerns investors is that the two companies' products are not very differentiated, making it easy for corporate customers to switch services. Both companies have filed IPO applications targeting formal listings this fall.
"Steady Payments Until Death"...U.S. Retirement Pension to Offer "Lifetime Salary"
Fidelity Investments of the United States will launch "Freedom Lifetime," a product that embeds a lifetime annuity into 401(k) retirement pensions, early next year. Under the structure, when a subscriber turns 55, part of their bond holdings begins converting into insurance contracts, so that by age 65, about 25% of total assets are allocated to annuity contracts. The annuity insurers are New York Life and Nationwide, with annual management fees of about 0.14% to 0.27%. The principal and interest are not guaranteed, but subscribers can choose options such as extending income through a spouse's lifetime or adding death benefits.
The product targets demand for a "lifetime salary" among baby boomer retirees in the United States, where the public pension foundation is weak. Industry leader Vanguard also announced a similar product last December, and BlackRock, which launched first two years ago, is seeing increasing corporate adoption, so the related market is expanding rapidly. In Korea, pension payments are possible from age 55 through an IRP, but there is a difference in that lifetime payments are not guaranteed.
