Fed Barkin: Best short-term policy path is rapid to neutral

    Richmond Fed President Thomas Barkin said yesterday, “the best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing, and how persistent inflation has become. If necessary, we can move further.”

    He added that the actions to combat inflation doesn’t “necessarily require a hard landing.” In fact, “it might help avoid one by convincing individuals and firms that the Fed is committed to our target, thereby cementing inflation expectations.”

    Barkin also said that the Fed needs to be “crystal clear that a growing economy requires stable prices, and that we will remain committed to addressing inflationary gusts.”

    US CPI rose to 8.5% yoy, core CPI rose to 6.5% yoy, highest since early 80s

      US CPI rose 1.2% mom in March, above expectation of 1.1% mom. CPI core rose 0.3% mom, below expectation of 0.5% mom.

      For the 12-month period, CPI accelerated from 7.9% yoy to 8.5% yoy, above expectation of 8.3% yoy. That’s the highest annual rate since December 1981.

      CPI core ticked up from 6.4% yoy to 6.5% yoy, below expectation of 6.6% yoy. That’s the fastest 12-month increase since August 1982.

      Energy index rose 32.0% yoy while goods index rose 8.8% yoy, largest 12-month increase since May 1981.

      Full release here.

      Germany ZEW economic sentiment dropped to -41, prospect of stagflation over next six months remains

        Germany ZEW Economic Sentiment dropped from -39.3 to -41 in April, but was better than expectation of -48. Current Situation Index dropped from -21.4 to -30.8, above expectation of -35.0. Inflation expectations dropped -43.4 pts to 26.8.

        Eurozone ZEW Economic Sentiment dropped from -38.7 to -43.0, above expectation of -46.5. Current Situation index dropped -6.6 pts to -28.5. Inflation expectations dropped -43.6 pts to 25.9.

        “The ZEW Indicator of Economic Sentiment remains at a low level. The experts are pessimistic about the current economic situation and assume that it will continue to deteriorate. The decline in inflation expectations, which cuts the previous month’s considerable increase by about half, gives some cause for hope. However, the prospect of stagflation over the next six months remains,” comments ZEW President Achim Wambach.

        Full release here.

        UK payrolled employees rose 35k in Mar, unemployment rate dropped to 3.8% in Feb

          UK payrolled employees rose 35k in March, comparing to February. Number of payrolled employees were 544k or 1.9% above prepandemic level in February 2020. Claimant count dropped -46.9k, larger than expectation of -41.1k.

          In the three months to February, unemployment rate dropped to 3.8% matched expectations. That’s -0.2% lower than the previous three-month period, and -0.1% below pre-pandemic levels. Average earnings including bonus rose 5.4% over the year, below expectation of 5.7%. Average earnings excluding bonus jumped 4.0% over the year, above expectation of 3.7%.

          Full release here.

          Australia NAB business confidence rose to 16, strong rebound led by consumer demand

            Australia NAB business confidence rose from 13 to 16 in March. Business conditions rose from 9 to 18. Looking at some details, trading conditions rose from 11 to 24. Profitability conditions rose from 5 to 13. Employment conditions rose from 8 to 12.

            “A surge in business conditions headlined a really strong March survey,” said NAB Group Chief Economist Alan Oster. “Businesses reported very strong trading conditions and a sharp rise in profitability, which indicates demand is continuing to hold up as the economy rebounds from Omicron and growth gathers momentum.”

            “Business confidence continued to improve in March, with little evidence of any adverse impact from events in Ukraine,” said Oster. “The outlook also strengthened in terms of forward orders which points to ongoing economic growth over coming months.”

            “Overall, the results depict a very strong rebound, led by strong consumer demand.”

            Full release here.

            Japan PPI rose 7.3% yoy in Mar, index at highest level since 1982

              Japan corporate goods price index rose 7.3% yoy in March, slowed from 9.7% yoy but beat expectation of 9.3% yoy. The March index, at 112.0, was the highest level since December 1982. The yen-based import price index surged 33.4% yoy, signaling that Yen’s depreciation could be amplifying import inflation.

              Separately, Finance Minister Shunichi Suzuki warned, “The government will closely monitor developments in the foreign exchange market, including the recent depreciation of the yen with a sense of vigilance. That includes the impact on the Japanese economy.”

              Fed Evans: Optionality of not going too far too quickly is important

                Chicago Fed President Charles Evans said yesterday that 50bps rate hike in May is “obviously worthy of consideration; perhaps it’s highly likely even if you want to get to neutral by December.” But he also emphasized, “the optionality of not going too far too quickly is important.”

                He added that but the end of the year, Fed will know a lot more about inflation. “Is it going to be that some of these pricing pressures have crested, and they start coming down? Or are they going to stay high — or are they going to be higher?” Evans said. “And if it’s because of supply concerns, real resource pressures, there’s going to be a lot of gnashing-of-teeth angst over the inflation versus the concern for the economy. And I think finding the right balance is going to always be at a premium.”

                NIESR forecasts 1% UK GDP growth in Q1, flat in Q2

                  As UK GDP grew merely 0.1% mom in Q2, NIESR said the final forecast for Q1 is for growth of 1.0% only. The initial nowcast for the second quarter of 2022 is for GDP unchanged from the first quarter, with a small quarter-on-quarter fall in production and a small rise in construction.

                  NIESR added: “NIESR research has suggested that inflation will now average 7 per cent in 2022, and GDP growth could be reduced by 0.8 percentage points to 4.0 per cent from the 4.8 per cent we forecast in our Winter 2022 UK Economic Outlook. This analysis will be updated in our Spring UK Economic Outlook, to be published on 10th May.”

                  Full release here.

                  CHF/JPY upside breakout as Yen selloff intensifies

                    Yen selloff steps up a gear today and even CHF/JPY breaks through short term top at 133.53 to resume its long term up trend. For now, short term outlook will remain bullish as long as 130.74 support holds. There is prospect of upside acceleration to next target at 161.8% projection of 117.51 to 127.05 from 124.23 at 139.66.

                    More importantly, as seen in the monthly chart, CHF/JPY is now trying to break through 161.8% projection of 101.66 to 118.59 from 106.71 at 134.10. Sustained trading above this level could set up the for medium term upside acceleration towards 151.22 (2014 spike high).

                    UK GDP grew only 0.1% mom in Feb, production contracted

                      UK GDP grew 0.1% mom only in February, below expectation of 0.3% mom. Services was the main contributor to growth, up 0.2% mom. But that was offset by -0.6% mom contraction in production, and -0.1% mom in construction.

                      Overall monthly GDP was 1.5% above its pre-coronavirus level in February 2020. Services was 2.1% above that level while construction was 1.1% above. However, production was -1.9% below.

                      Full release here.

                      Also published, manufacturing production came in at -0.4% mom, 3.6% yoy, versus expectation of 0.4% mom, 2.5% yoy. Industrial production came in at -0.6% mom, 1.6% yoy, versus expectation of 0.4% mom, 1.4% yoy. Goods trade deficit narrowed to GBP -20.6B, larger than expectation of GBP -16.8B.

                      China PPI slowed to 8.3% yoy, CPI rose to 1.5% yoy in Mar

                        China PPI slowed from 8.8% yoy to 8.3% yoy, but still beat expectation of 7.9% yoy. However, the monthly rise of 1.1% mom in PPI was the fastest in five months, driven by surges in oil prices and non-ferrous metals.

                        CPI accelerated from 0.9% yoy to 1.5% yoy in March, above expectation of 1.2% yoy. Core CPI, excluding food and energy, rose 1.1% yoy, unchanged from February’s reading. Prices of some food like flour, vegetable oil, fresh vegetables and eggs rose and were “affected by the rise in international prices of wheat, corn and soybeans and the domestic [coronavirus] outbreaks”, noted senior NBS statistician Dong Lijuan.

                        BoJ Kuroda: Economy to continue to recover despite rising commodity prices

                          BoJ Governor Haruhiko Kuroda said in the quarterly branch manager meeting, “Japan’s economy has picked up as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19.”

                          “As downward pressure on service consumption and the impact of supply shortages diminish, a pickup in overseas demand, accommodative monetary policy, and the government’s economic stimulus will likely help the Japanese economy recover despite being affected by rising commodity prices,” he added.

                          Kuroda also cautioned that “extremely high uncertainties” remain over how the crisis in Ukraine will impact commodity prices and the Japanese economy. But he also indicated that commodity inflation is unlikely to trigger a change in the central bank’s ultra-loose policy, because it wouldn’t last long.

                          CAD/JPY recovers mildly, but stays in consolidation

                            CAD/JPY recovers mildly after better than expected Canadian job data. But it’s just staying well inside consolidation pattern from 110.17. More sideway trading could still be seen. But outlook remains bullish with 96.70 support intact. Larger up trend is expected to resume sooner or later through 100.17 short term top.

                            In case of upside breakout, next target will be 100% projection of 73.80 to 91.16 from 84.65 at 102.01.

                            Canada employment grew 73k in Mar, unemployment rate dropped to record low 5.3%

                              Canada employment grew 73k, or 0.4% mom, in March, slightly below expectation of 78k. The growth was driven by 93k rise in full-time jobs. Services-producing jobs rose 42k while goods-producing jobs rose 31k.

                              Unemployment rate dropped -0.2% to 5.3%, lowest on record since 1976. Total hours worked rose 1.3% mom. Average hourly wages rose 3.4% yoy.

                              Full release here.

                              WTI oil gyrates lower as medium term consolidation extends

                                WTI crude oil continued to gyrate lower this week. EU has yet confirmed banning Russian coal and even if they do, it’s not expected to take effect until August. Oil embargo is not in sight. Meanwhile, oil demand in China is not looking good as coronavirus lockdowns put activity in Shanghai into a halt.

                                Anyway, the current fall from 118.57 in WTI crude oil is seen as a leg inside the medium term corrective pattern from 131.82. Deeper decline might be seen through 93.98 support. But strong support should be seen at around 85.92 resistance turned support to bring rebound.

                                On the upside, break of 106.59 resistance will bring rebound back to 118.57 resistance and possibly above. But there is no scope in break through 131.82 high for the near term. The corrective pattern will take a while to complete.

                                Fed Bostic: Appropriate to move policy to neutral, in a measured way

                                  Atlanta Fed President Raphael Bostic said yesterday, “it’s time that we get off of our emergency stance — I think it’s really appropriate that we move our policy closer to a neutral position — but I think we need to do it in a measured way.”

                                  At the same virtual conference, Chicago Fed President Charles Evans said, “I’m optimistic that we can get to neutral, look around, and find that we’re not necessarily that far from where we need to go.”

                                  Bullard: Fed is behind the curve

                                    St. Louis Fed president James Bullard said in a presentation, “standard Taylor-type monetary policy rules, even if based on a minimum interpretation of the persistent component of inflation, still recommend substantial increases in the policy rate.” Also, “credible forward guidance means market interest rates have increased substantially in advance of tangible Fed action. Both are indications that Fed is “behind the curve”.

                                    The recommended policy rate from Bullard’s simple Taylor-type policy rule calculation is 3.5%, while the current value of the policy rate is 37.5 basis points. “One concludes that the current policy rate is too low by about 300 basis points, according to this calculation,” Bullard said.

                                    Full release here.

                                     

                                    US initial jobless claims dropped to 166k

                                      US initial jobless claims dropped -5k to 166k in the week ending April 2. Four-week moving average dropped -8k to 170k. Continuing claims rose 17k to 1523k in the week ending March 26. Four-week moving average of continuing claims dropped -25k to 1541k.

                                      It should be noted that the methodology used to seasonally adjust the numbers were revised with this release.

                                      Full release here.

                                      ECB accounts: War risks slowflation only, not stagflation

                                        The accounts of ECB’s March 9-10 meeting noted that “while the Russian invasion of Ukraine had increased uncertainty surrounding the macroeconomic outlook, related risks to the inflation outlook were seen as largely one-sided, with experience suggesting that wars tended to be inflationary”.

                                        “While the war would likely dent economic growth in the short term, annual growth was projected to remain positive even in the severe scenario, pointing to ‘slowflation’ rather than stagflation.”

                                        “The greater persistence of inflation increased the probability of second-round effects via strengthening wage dynamics…. a longer period of above-target inflation would lead to an increased risk of an upward unanchoring of longer-term inflation expectations.”

                                        Thus, the Governing Council could “no longer afford to look through higher inflation, even if it was driven by an adverse supply shock.”

                                        ECB decided at the meeting to revise the plan for APP net purchases, with the option to end after June. “Easing bias” was removed from the forward guidance. Interest rate hike would come “shorter” after ending the net purchases, depending on incoming data.

                                        Full accounts here.

                                        Eurozone retail sales rose 0.3% mom in Feb, EU up 0.3% mom

                                          Eurozone retail sales rose 0.3% mom in February, below expectation of 0.6% mom. Volume of retail trade increased by 3.2% for automotive fuels, and by 0.8% for non-food products, while it fell by 0.5% for food, drinks and tobacco.

                                          EU retail sales also rose 0.3% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Slovenia (+8.0%), the Netherlands (+4.0%) and Portugal (+2.3%). The largest decreases were observed in Belgium (-1.8%), Estonia (-1.7%), and Poland (-1.6%).

                                          Full release here.