ECB raises rates as energy shock fuels inflation

The European Central Bank (ECB) has raised its three key interest rates by 25 basis points as conflict-driven energy costs keep inflation above target, increasing pressure on borrowing costs across the euro area. From 16 September, the deposit facility rate will rise to 2.50%, while the main refinancing operations and marginal lending facility rates will reach 2.65% and 2.90% respectively. Policymakers said the Middle East conflict was continuing to generate inflationary pressure, with risks tilted towards stronger price growth and weaker economic activity.

Inflation accelerated to 3.3% in August from 2.9% in July, driven partly by a jump in energy inflation to 14.3%. Inflation excluding energy and food eased slightly to 2.4%, while services inflation fell from 3.3% to 3.0%.

Wage data have yet to show a material response to the shock. Compensation per employee slowed to annual growth of 3.3% in the second quarter from 3.5%, while improving productivity helped reduce unit labour cost growth to 2.6% from 3.5%. Unit profit growth, however, rose to 2.2% from 0.3% over the same period.

Speaking at the monetary policy press conference, ECB President Christine Lagarde said higher energy prices were likely to keep headline inflation “well above target into the first half of 2027”. Their persistence and any subsequent effect on other prices, wages and expectations will remain central to policy decisions.

Staff projections put headline inflation at an average 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Forecasts for 2027 and 2028 were revised upwards from June, although the 2026 estimate was unchanged. Core inflation is projected at 2.5%, 2.6% and 2.3% over the same three years.

Economic growth is forecast at 0.9% this year, rising to 1.4% in 2027 and 1.5% in 2028. Upgrades for the first two years reflect stronger than expected resilience, including support from private consumption and public spending.

Manufacturing has remained solid amid higher government expenditure on defence and infrastructure, while services have recovered alongside consumer confidence. Unemployment held at 6.4% in July, although employment and labour force growth continued to slow.

Lagarde warned that disrupted energy supplies, tighter credit conditions and renewed trade tensions could weaken investment and demand. She also stressed the uncertain direction of policy: “We are not pre-committing to a particular rate path.”

Financing conditions have already tightened for businesses. Bank lending rates for firms rose to 3.8% in June and July from 3.6% in May, while the cost of market-based corporate debt stood at 4.0% in July. Annual bank lending growth nevertheless increased to 4.4%.

Lauren Hyslop, investment manager at Mattioli Woods, said attention would now shift to the market consequences. “Government bond yields may stay elevated for a while yet, a boon for income-seeking fixed income investors, while equity markets are likely to reward discrimination over direction,” she said.

Hyslop added that highly leveraged and rate-sensitive businesses remained under pressure, while those with genuine pricing power, dependable cash flows and sound balance sheets were better placed. Elevated yields and higher financing costs reinforce the need for treasurers to scrutinise refinancing exposure and liquidity buffers.

 

AFP finalists put AI to work across treasury

Bandwidth, Google and ServiceNow have been named finalists for the AFP 2026 Pinnacle Awards for projects applying AI and automation to distinct treasury challenges spanning liquidity, investments and financial data.

Bandwidth replaced a legacy treasury management system, which depended on manual data collection, spreadsheets and limited bank connectivity, with a platform built by its treasury team. Combining Atlar’s real-time bank connectivity with Claude, the system provides a consolidated view of liquidity across entities and banking partners.

Automation covers cash forecasting, transaction categorisation, liquidity analysis and multilateral netting, alongside debt, covenant and bank fee monitoring. Connected information has reduced the time spent gathering and reconciling data, allowing the team to concentrate more heavily on liquidity management and capital allocation.

Google focused on its investment process, developing an automated workflow around its existing Swift, MT320, banking and ERP infrastructure. Machine-learning models produce daily cash forecasts, calculate investable cash and provide liquidity outlooks.

AI agents collect counterparty rates and assess investment options against yield, liquidity requirements and counterparty limits. A separate execution agent handles trade placement and ERP entries, reducing manual reconciliation and giving treasury earlier visibility over available cash and market opportunities.

ServiceNow first addressed the fragmented data that constrained its treasury operation as the company expanded across more than 50 countries. Staff had been spending 40 to 60 hours each week collecting and reconciling information from disconnected banks, systems and entities.

Its team integrated more than 10 source systems into a central architecture covering cash, investments, forecasts, FX and banking data before applying AI. Tools added subsequently include real-time dashboards, a treasury chatbot, machine-learning cash forecasting, automated hedging across more than 40 currency pairs and counterparty exposure monitoring.

Each company was selected through a blind review by treasury and finance professionals. Established in 1997, the awards recognise projects intended to improve treasury efficiency, strategy and effectiveness. Voting for the grand prize remains open until 18 September, with the winner due to be announced at AFP 2026 in Las Vegas in November. The awards are sponsored by Truist.

Pat Culkin, president and chief executive of AFP, said: “When treasury and finance leaders connect to share bold ideas and solve complex challenges, the entire profession moves forward. The solutions created by Bandwidth, Google and ServiceNow showcase a spirit of innovation and set a higher standard for our global community.”

Taken together, the projects show three different routes to applying AI in treasury. Bandwidth chose an internally built alternative to a conventional treasury system, Google extended automation through the investment lifecycle and ServiceNow established a common data foundation before deploying specialist tools. Their approaches also underline that useful AI depends on connected data, defined decision rules and integration with the systems where treasury work is executed.

 

Energy risks cloud rate paths across major markets

Energy risks reinforced expectations for tighter monetary policy across major markets in August, although weakening labour indicators complicated the outlook for central banks in the UK and US, according to Northern Trust Asset Management.

In its Liquidity Link monthly commentary, Daniel Farrell, head of international fixed income at the asset manager, examined how persistent inflation, resilient economic activity and renewed Middle East hostilities affected rate expectations and government bond yields.

Published before the ECB’s September rate rise, Farrell’s analysis characterised euro area markets as moving towards a more decisive policy outlook during August. No meeting took place that month, leaving the deposit rate at 2.25%, but markets had priced in a 25-basis-point increase for September by month-end.

Incoming data supported his assessment of the case for near-term tightening. German inflation reached 2.9% year on year in August, while second-quarter euro area GDP growth was confirmed at 0.4% quarter on quarter. The flash composite purchasing managers’ index rose to 52.1, led by the strongest manufacturing expansion in more than four years.

Bund yields increased during the month, particularly at shorter maturities, as investors positioned for higher rates. Farrell also identified renewed US-Iran hostilities and rising oil prices as reasons for energy supply risk to remain central to the inflation outlook.

His UK assessment balanced renewed inflation pressure against clearer evidence of labour-market cooling. Bank Rate remained at 3.75% without an August Monetary Policy Committee meeting, while Bank of England Governor Andrew Bailey highlighted limited second-round inflation effects and a softening labour market.

Headline inflation increased to 2.9% in July from 2.6% in June and the October energy price-cap reset presented a further upside risk. Payrolled employment, however, fell for a sixth consecutive month, private-sector wage growth slowed to 2.8% and vacancies declined. Farrell noted that markets ended August assigning little probability to an immediate rate rise.

In the US, Farrell described another sharp reassessment of the policy path as weak payrolls competed with persistent inflation and hawkish Fed communication. The federal funds target remained at 3.50% to 3.75%. Payrolls fell by 23,000 and earlier months were revised down, but headline inflation remained at 3.4% in July and core personal consumption expenditures inflation held at 3.3%.

Minutes from the Fed’s July meeting showed several participants favoured a rate increase. Subsequent policy comments and firm jobless claims rebuilt the implied probability of a September move to about two-thirds by the end of August, while shorter-dated Treasury yields led an increase across the curve.

Farrell identified energy as the thread linking otherwise divergent domestic conditions. “Across markets, energy volatility remains the main common threat to disinflation,” he wrote.

Policy meetings and incoming inflation and labour data were expected to keep bond markets volatile during September. Farrell wrote: “Portfolio strategy should continue to emphasise liquidity, issuer quality and disciplined maturity selection while retaining flexibility around potentially volatile central bank meetings.”

 

AI demand lifts trade outlook as shipping slips

Global goods trade gained momentum in mid-2026 as demand for AI-related components helped offset geopolitical disruption. Container shipping nevertheless slipped below trend, providing a weaker signal for physical trade flows.

The World Trade Organization’s September Goods Trade Barometer registered 102.0 for July, up from 101.7 in its previous edition, published in June. Produced by the WTO Secretariat, the composite leading indicator uses 100 as its trend baseline, with higher readings associated with above-trend merchandise trade volumes.

Its latest result suggests growth continued to accelerate during the third quarter. World merchandise trade volume had already increased by 3.2% year on year in the first quarter, according to the report’s underlying trade chart. That compared with 5.4% a year earlier, after growth reached 4.7% in the final quarter of 2025.

Electronic components recorded the strongest of the barometer’s six component readings at 104.9, reflecting demand for goods used to support AI investment. Export orders climbed to 103.5, which the WTO said pointed towards stronger merchandise trade growth in the coming months.

Air freight and agricultural raw materials were also firmly above trend at 102.8 and 102.6 respectively. Automotive products registered a more modest 101.5.

Under the methodology, export orders and international air freight are leading indicators, while container throughput is a coincident measure. Electronics and agricultural raw materials lead both trade and GDP because they enter the production of other goods.

Container shipping was the sole component below its baseline, slipping to 99.6. The measure covers 90 international ports accounting for around 64% of global container throughput, making the divergence from stronger export orders a notable caution within the headline result.

AI-related demand is helping to counter pressure from the Middle East conflict and continuing uncertainty over trade policy, the Secretariat found. That support could prove economically significant: its March Global Trade Outlook and Statistics report estimated that sustained AI investment could add 0.5 percentage points to merchandise trade growth during 2026.

Baseline projections from the earlier outlook put this year’s growth at 1.9%. Under a high-energy-price scenario, growth would slow to 1.4%, illustrating the sensitivity of global goods flows to the Middle East conflict.

Current trade data may not yet show the full effect of disruption in the Strait of Hormuz. Although year-on-year volume growth remained positive in the first quarter, the WTO expects the impact to be captured more fully when second-quarter figures become available.

Stronger orders alongside sub-trend container activity complicate corporate demand and cash-flow planning. Sales pipelines may remain firm while shipping disruption and energy costs alter delivery schedules, inventory funding requirements and margins.

An updated WTO trade forecast is due in October. Its assessment will indicate whether AI-linked demand can continue supporting merchandise trade as more complete evidence of energy and transport disruption enters the data.

 

August money market inflows double as equity selling continues

UK investors added a net £364m to money market funds (MMFs) in August, twice the 12-month average and the largest inflow since November, while withdrawing £315m from equity funds. It was the fourth consecutive month of net selling for equity funds and their 14th outflow in 15 months, according to Calastone’s latest Fund Flow Index. August’s withdrawal was nevertheless considerably smaller than the £1.61bn removed in July.

Cumulative equity outflows since June 2025 have now reached £15.16bn. Selling during August was concentrated in funds investing in UK equities, which lost £601m, and European equities, down £145m. Specialist sector funds shed another £52m.

North American equity funds recorded a marginal £3m withdrawal, their first outflow since November 2025. It represented only 0.06% of the £4.9bn in combined buy and sell orders, indicating that activity was essentially balanced.

Bond funds attracted £407m during August, marking a fourth consecutive monthly inflow but remaining broadly in line with their average over the previous year. Combined net inflows into bond and MMFs reached £771m.

Since the equity withdrawals began in June 2025, those two asset classes have absorbed £8.7bn. Calastone attributed their appeal to the income, liquidity and reduced downside risk they offer investors.

Edward Glyn, head of global markets at Calastone, said the persistence of the equity trend was highly unusual. “Such prolonged outflows from equity funds are incredibly rare,” he said. “Investors aren’t panicking, but they are stubbornly refusing to chase equity markets higher.”

Glyn linked that caution to markets trading near record highs and continuing Budget speculation. Concern that capital gains treatment or pension tax benefits could change may be encouraging some investors to act before any announcement while remaining reluctant to add to equities.

“Cash is also doing more of the talking,” Glyn said. “When investors can earn a decent return without taking equity risk, there is much less pressure to chase the market.”

Calastone’s index analyses orders from UK-based investors into UK-domiciled funds, with classifications reflecting where each fund invests. More than 85% of UK fund flows by value pass through its network. Funds of funds are excluded to prevent double-counting and totals are adjusted for Calastone’s market share.

August’s strong inflow for MMFs highlights the value investors place on preserving liquidity while continuing to earn income. Capital is still being deployed, but the availability of returns outside equities is making it easier to remain cautious.

 

London market confidence rises on IPO and M&A hopes

Confidence in London’s capital markets has strengthened among senior figures at UK-listed companies, with expectations rising for initial public offerings, acquisitions and improved access to finance, according to Deutsche Bank research.

Its fourth annual ‘Raised in London’ report surveyed 150 directors and senior leaders from FTSE 100, FTSE 250, AIM and other listed businesses. Some 87% said the UK’s appeal as a capital market and investment destination had increased over the previous 12 months.

IPO sentiment was particularly strong. Almost all respondents, 97%, regarded the UK as an attractive market for floating a company or raising capital, while 94% expected domestic IPO volumes to increase during the next two years.

Economic confidence has also recovered. Nine in ten leaders were more optimistic about UK growth prospects than they had been two years earlier, while 95% believed the Government’s growth strategies had made the country more attractive to investors.

Vathany Vijayaratna, chief executive of Deutsche Bank in the UK and Ireland, said: “Boards are becoming more positive about the outlook for UK-listed companies and the opportunities available through the public markets. The survey shows strong support for reforms that strengthen domestic investment and improve access to growth capital.”

Dealmaking expectations were similarly positive. Some 87% anticipated an increase in UK mergers and acquisitions during the coming year, while 90% said their own organisation was likely to undertake an acquisition.

Financing conditions provided another source of optimism, with 93% reporting positive developments in either debt pricing or the availability of funding. Improved financing can widen the range of viable transactions and investment projects, giving CFOs more options over funding structure and timing.

Respondents nevertheless identified constraints that could determine whether the improvement in sentiment translates into capital-markets activity. Priorities included further regulatory reform, greater mobilisation of long-term domestic capital and better valuations.

Deeper market liquidity was also seen as necessary to support high-growth companies throughout their development. Those findings place the emphasis on converting stated IPO and acquisition intentions into completed transactions, rather than treating stronger boardroom confidence alone as evidence of a sustained London market recovery.

 

Ripple expands treasury AI with mandatory human approval

Ripple has expanded the AI capabilities within its treasury platform, adding policy-governed tools across forecasting, liquidity, risk, reconciliation and reporting. GSmart is already in production among the company’s enterprise customers, according to the company’s announcement.

Its design separates calculations from interpretation. Deterministic engines produce figures used in financial decisions, while AI interprets treasury policies, identifies patterns and explains recommendations. Treasury staff retain approval authority over every financial action.

Specialist agents monitor defined processes, propose actions and cite the relevant policy clause before seeking approval. Nothing is executed until a person approves it, creating an auditable checkpoint around automated analysis and proposed actions.

Knowledge Studio allows treasury teams to define the policies and controls governing the agents. Proposed actions are tested against those rules before being escalated for review. Analytics Studio includes Ask GSmart, a conversational assistant intended to retrieve answers and analysis from treasury data.

Adoption figures released by Ripple show 60% of eligible customers have enabled Risk Insights, which flags exposure anomalies and policy breaches. Forecast Insights is used by 44%, comparing forecast and actual cash flows to identify emerging liquidity gaps.

Citing Gartner, Ripple said the average Fortune 500 company could have more than 150,000 AI agents by 2028, while only 13% of organisations believe they currently have appropriate governance. The figures underline the control problem facing finance functions as agent use increases.

GSmart's reported take-up cannot be fully assessed from the announcement because Ripple did not disclose the number of eligible customers. It also provided no performance data on forecast accuracy, alert quality or the time saved by users.

Practical value for treasury will depend on the quality of underlying data and policies, alongside whether recommendations improve cash visibility and risk oversight. Approval controls may help preserve accountability, but their effectiveness will rest on how clearly exceptions are surfaced and how efficiently staff can review them.

 

Finastra and Komgo link platforms for digital trade workflows

Finastra and Komgo have agreed to connect their trade finance platforms, aiming to reduce manual hand-offs between banks, corporate customers and the systems used to manage transactions. Planned integration targets fragmented, data-intensive processes that require information to be passed between separate bank and corporate systems.

Integration will run through Finastra’s Trade Innovation Nexus, an open API layer linking Komgo’s Konsole platform with Finastra Trade Innovation. The connection is intended to support workflows across both systems while allowing banks to retain their existing infrastructure.

Rather than moving information manually between separate applications, users would be able to process activity through connected digital workflows. Finastra and Komgo said these would cover transaction processing, customer onboarding and the handling of manual exceptions, with greater visibility across participants.

Compliance and control functions form another part of the planned integration. The companies said workflows would include regulatory checks, security features, reporting and audit records, alongside tools for assessing trade finance risks. Straight-through processing is intended to provide an auditable route for transactions requiring no manual intervention.

Corporate customers using the connected services could gain a more consistent view of trade finance activity across the two environments. Komgo’s Konsole provides multi-bank digital trade finance infrastructure, while Finastra contributes its Trade Innovation system and Nexus API layer.

Neither company disclosed when the integration would become available, which trade finance instruments it would initially support or whether any banks or corporate customers had committed to using it. No transaction-time reductions or other performance measures were provided with the announcement.

Operational significance will therefore depend on how consistently transaction data, compliance checks and status information move between the platforms. Effective integration could reduce duplicated handling for banks and their customers, but the partnership’s claimed processing and visibility improvements remain to be demonstrated through live deployments.

 

Nomentia builds AI and risk tools into treasury suite

Nomentia has expanded its Smart Treasury Suite with six capabilities intended to connect forward-looking analysis, AI-assisted workflows and core treasury processes within a shared control environment.

Forecasting and scenario analysis form the main decision-support additions. Predictive Forecasting uses historical cash flow data to produce short, medium and long-term projections alongside existing liquidity and subsidiary forecasts. Teams can compare those views with actual outcomes, while testing how changed assumptions could affect liquidity and financial risk. Guarantees and other contingent items remain visible during that analysis.

Reporting and automation have also been extended through Analytics and AI agents. Preconfigured dashboards and self-service tools are supplemented by natural-language queries, allowing users to interrogate treasury data without repeatedly exporting it to rebuild reports.

Access remains constrained by each user’s permissions. Financial calculations are handled by deterministic platform services, while existing controls apply to AI workflows and proposed changes require human approval. Nomentia said its AI can also be accessed through ChatGPT, Claude or Microsoft Copilot.

Operational coverage now includes intercompany netting and hedge accounting. Netting tools are intended to structure internal obligations and settlements, reducing unnecessary payment flows and giving treasury greater oversight of liquidity across group entities.

Hedge Accounting supports documentation, effectiveness assessment and accounting entries across the cash flow hedge lifecycle. It covers FX and interest-rate hedging under IFRS 9 or applicable local accounting standards.

Rather than requiring all six additions to be adopted together, Nomentia is offering them as individual modules connected to the suite’s existing bank and ERP data, workflows and controls.

Implementation will determine whether the combined approach delivers useful insight. Forecast quality will depend on historical data, while AI-supported recommendations will rely on consistent permissions and policies. Integrating those functions with netting and hedge processes could reduce manual hand-offs, but Nomentia provided no customer performance data alongside the release.

 

Körber deploys Surecomp for multi-bank export LC processing

Körber Technologies has moved its global trade finance operations onto Surecomp’s RIVO platform, replacing a legacy system and automating parts of its export letter of credit processing.

RIVO connects the manufacturer with multiple banks and centralises visibility over its trade finance transactions. Generative AI interprets structured and non-standard banking messages, captures LC information and registers it in the platform. Körber is using the capability to map EBICS messages and process export LCs.

Hosted on Amazon Web Services, the system is intended to reduce bank-specific technical handling and manual data entry. Körber has also migrated historical and active transactions from its previous system.

As part of the Körber Group, Körber Technologies supplies tobacco processing machinery and related systems to customers internationally. Export LCs form part of the controls supporting those cross-border sales, making consistent bank communication and transaction records relevant to both risk oversight and operational processing.

Surecomp said consolidating information from several banks should improve data consistency and give Körber a clearer basis for monitoring trade finance exposures. Automated interpretation may also reduce manual intervention when banks use different message formats, although the company did not disclose transaction volumes, the number of connected banks or measured processing-time reductions.

Centralising current and historical LC data could make outstanding obligations and transaction status easier to monitor across the business. Operational benefits will depend on the accuracy of message interpretation and treatment of exceptions, particularly where non-standard communications require review. Reliable exception handling will therefore be central to reducing manual work without weakening data consistency or control.