Daily update
Daily update
- European Central Bank President Lagarde did, after all, offer policy comments yesterday—in an Irish TV interview. Lagarde signaled a June Euro area rate cut is coming, because inflation is under control. Markets already expect this. Currently, US inflation is the same as that of Europe when measured on a like-for-like basis, so why is the Federal Reserve delaying rate cuts?
- Politicization may be part of the problem. Politicians (in all countries) like things kept simple. For years US politicians focus on the headline consumer price index, despite its flaws as a price measure. Since the policy errors of mid-2022, Fed Chair Powell clearly wants to hang out with the cool kids in Congress rather than the geeks of the economics club. This means other inflation measures are overlooked, despite signaling that cuts might be appropriate.
- Bank of England Governor Bailey suggested a UK summer rate cut may be coming, with more confidence that inflation will stay low. Various consumer inflation numbers published today should show a sizeable drop, as the weirdness of UK energy prices goes through one of its periodic lurches.
- Japanese April trade data showed growing exports, but less than expected. Demand from China disappointed. As elsewhere, exports related to semiconductors and autos were strong.
