Daily update
Daily update
- Iran confirmed progress in talks with the US, lending credibility to US President Trump’s weekend social media posts. A deal still seems some way off, but progress is enough to fuel markets’ inherent bias to optimism and oil prices have fallen. Reopening Hormuz would not return oil prices to pre-war levels. However, the impact of any Iranian tariff on tankers using the strait (probably around USD 2 million per shipment) would be an economic rounding error for global inflation.
- ECB President Lagarde talked of raising inflation forecasts at the next ECB meeting. The current forecasts were made in the early days of the Iran war. Lagarde denied that this would automatically cause the ECB to commit a policy error and raise rates, but highlighting such a technical change seems rather deliberate.
- Trump’s economic adviser Hassett suggested that as oil prices are the main inflation driver, a resolution of the war should allow the Fed to cut rates. Remarkably, that is sensible analysis—assuming no second-round effects. The question is whether Federal Reserve Chair Warsh has the authority to get rates cuts through in the event of a close decision.
- Japan’s April department store sales confirmed the developed economy trend of resilience in non-oil sales, reflecting consumer balance-sheet health.