Daily update
Daily update
- South Korea announced a price cap for some petroleum products, as crude oil prices rose above USD 100 a barrel. An oil price shock does not have to be a price and growth shock— the pain may be taken in fiscal policy. The G7 is apparently considering an emergency use of strategic oil reserves, but that is a temporary fix.
- The US is unlikely to use price caps. US gasoline prices on Sunday were 23% above this year’s lows. The price level is not likely to disrupt GDP growth (it is below mid-2024 levels), but it will change inflation perceptions. Several high frequency purchases have risen significantly in price since January 2025 (beef +15%, coffee +18%), and consumers tend to remember such increases. Perceptions create the US affordability crisis.
- The NY Federal Reserve inflation expectations data will not reflect soaring gasoline prices, but will reflect grocery and electricity prices. However, inflation expectations only matter if they change consumers’ spending decisions, or workers’ wage demands. Otherwise, inflation expectations are meaningless noise.
- Germany’s Baden-Wuertemberg state elections saw Chancellor Mertz’s CDU lose to the Greens, with the far-right AfD increasing support. Global new reporting tends to be more negative and more sensational compared to the past (that is what earns clicks), challenging incumbent governments.