Archive

EA Inflation Eases ECB Cut in June

• The final EA HICP inflation print confirmed the unsurprising stability at 2.4% in the April flash release. Energy price base effects will probably push it higher again in May.
• Underlying inflationary pressures have continued falling, with most statistical measures under 3% y-o-y with monthly impulses at or slightly below the ECB’s target.
• Like the consensus, we expect inflation to stay close to 2%. This outlook and subdued underlying pressures will likely ease the ECB’s decision to start cutting rates in June.

By Philip Rush

Assets May Inflate Like It’s ‘98

• Rate cuts are rare outside of recessionary regimes. The 1998 experience seems a more similar historical example for the BoE than 1989 or 2005, when its policy diverged.
• CPI inflation will probably be less benign because wage growth is much higher, so sterling may not stay as stable. The speed of possible policy reversal would be critical.
• Loosening monetary conditions when the real economy doesn’t need it risks stimulating a financial bubble. Carefully hedged investments would help avoid the eventual bust.

By Philip Rush

US CPI Inflation 3.36% y-o-y (consensus 3.4%) in Apr-24

- US CPI inflation in April 2024 slowed to 3.36% year-on-year, marginally on the low side of the consensus estimate.
- The Core CPI rate matched expectations by slowing to 3.6% year-on-year in April 2024. That is a welcome improvement, but it still shows excessively high underlying pressures.

India CPI Inflation 4.83% y-o-y (consensus 4.8%) in Apr-24

- India's CPI inflation in April 2024 was broadly in line with expectations and the previous month at 4.83% y-o-y.
- However, this growth represents the lowest inflation rate since May 2023 and is below both the one-year average and long-run average, which could have significant implications for economic policies and decision-making.