Archive

Korea CPI 2.9% y-o-y (consensus 3.0%) in Apr-24

- Korea's Consumer Price Index (CPI) slowed to 2.9% year-on-year in April 2024, slightly below market expectations of 3.0%, indicating a renewed deceleration in inflationary pressures.
- This CPI growth is the lowest since January 2024, or July 2023 before that, and falls 0.25 percentage points below the one-year average.

Lane - The analytics of the monetary policy tightening cycle

Guest lecture by Philip R. Lane, Member of the Executive Board of the ECB, at Stanford Graduate School of Business

In this speech, Philip R. Lane, a member of the Executive Board of the ECB, reviews the ECB's monetary policy tightening cycle. He highlights that the tightening began in December 2021 and constituted a major surprise compared to expectations. The tightening cycle aimed to unwind an accommodative monetary stance and contain the inflation shock resulting from the large increase in inflation after the unjustified Russian invasion of Ukraine. Throughout the cycle, the transmission of monetary policy to financial markets and the banking sector has been relatively smooth. Market interest rates, money market rates, and lending rates have all responded to the tightening measures. The exchange rate response has been muted, and sovereign bond markets have coped well with the increase in interest rates. The flow of credit to firms has declined, but there are signs of stabilization, while lending conditions to households have shown tentative stabilization. Institutional factors, such as banking supervision and macroprudential policies, have played a significant role in shaping the risk-taking behavior of banks.


Positivity score: 75
Uncertainty score: 60

Hedge in May and Go Away

• A sharp rise in market rates drove down equity prices in April. The correlated move was consistent with our suggestion before Easter to hedge the downside with equity options.
• We now believe the front end is broadly flat enough, so we have turned neutral on rates relative to the market despite being more hawkish than the consensus on the BoE.
• The potential for market expectations to overshoot again, extending the bearish trends, means hedging with options may still appeal over selling or hoping for recovery.

By Philip Rush

Switzerland CPI Inflation 1.4% y-o-y (consensus 1.1%) in Apr-24

- Switzerland's CPI inflation rate for April 2024 increased to 1.4% year-on-year, surpassing market expectations of 1.1%.
- The month-on-month change in CPI for April 2024 increased to 0.3%, which is a brisk annualised pace.