Closing post
Time to recap…..
A closely watched measure of US inflation picked up in March, rising to an annual rate of 3.5%.
The consumer-price index (CPI) – which measures a broad range of goods and services – rose 0.4% from February, higher than the 0.3% expected. Core CPI, which removes the volatile food and energy categories rose 0.4% from February v an expected 0.3%.
The latest news will be closely parsed by the Federal Reserve, which has been attempting to cool inflation with a series of interest rate rises. Monthly inflation figures proved higher than expected in both January and February.
Inflation has fallen sharply from a high of over 9% in 2022 but it has remained stubbornly above the Fed’s target rate of 2%.
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The dollar strengthened on the news, as investors ripped up forecasts of three cuts to US interest rates this year.
Global stock markets also weakened, with the US S&P 500 currently down 53 points or 1% at 5,156 points.
Ronald Temple, chief market strategist at Lazard, sums up the situation:
“The likelihood of a June Fed rate cut declined materially today. Three months of surprisingly strong services inflation are difficult to explain away and suggest that demand strength could be sustaining elevated US inflation, which limits the Fed’s ability to ease policy.”
In other news:
Aggressive use of industrial policy by the world’s most powerful economies risks becoming an expensive mistake that could trigger a tit-for-tat subsidy war, the International Monetary Fund has said.
In a warning shot to governments around the world, the IMF said attempts to increase innovation only worked under certain limited conditions and were not a “magic cure” for slow growth.
Era Dabla-Norris, the deputy director of the IMF’s fiscal affairs department, said:
“History shows that getting industrial policy right can be a tall order, and there are many cautionary tales of policy mistakes, high fiscal costs and negative spillovers to other countries.”
