The headlines that the global financial media paid attention to last night and this morning mainly include:
1. Fed minutes: Aggressive tightening of monetary policy will provide ‘flexibility’ later this year
2. Harvard economist Rogoff: The world is entering a “new era” of higher inflationary pressures
3. Lagarde’s interest rate plan wins ECB support, but big rate hikes are still in play
4. U.S. drivers begin to hesitate about record gasoline prices
5. Bird flu hits the United States, and the price of eggs in the United States is expected to rise 21% this year
6. The stock market is so choppy that even low-volatility ETFs are not a safe haven
Minutes: Fed sees sharp rate hikes to provide policy flexibility later this year
Most Fed officials at this month’s meeting agreed that the Fed needs to raise rates by 50 basis points at each of the next two meetings, and that a series of sharp tightening will give policymakers flexibility later if necessary. Shift”.
Minutes of the Fed’s May 3-4 meeting released in Washington on Wednesday showed that “most participants believe that a 50 basis point rate hike may be appropriate at each of the next two meetings. Many participants predicted an accelerated withdrawal of The release of supportive monetary policy will put the Committee in a good position later this year to better assess the impact of policy tightening and the extent to which developments in the economy will support policy adjustments.”
Fed officials are trying to cool the hottest inflation in 40 years without causing a recession. The minutes of the meeting confirmed that after raising rates by 50 basis points at the May meeting, most officials supported raising rates for at least the next two meetings, as the battle against inflation is far from won.
According to the minutes of the meeting, Fed officials believe that monetary policy that restricts economic growth may be appropriate, depending on the economic outlook and related risks. Officials believe the labor market continues to be undersupplied.
Harvard economist Rogoff: The world is entering a ‘new era’ of higher inflationary pressures
Harvard economist Kenneth Rogoff said the world was entering a “new era” where higher inflationary pressures could force central banks to raise interest rates.
Factors that once lowered consumer prices are now reversing, potentially keeping inflation higher than policymakers had expected, the former International Monetary Fund chief economist said at a web event hosted by the Bank of Japan. The result will require a firm response from the central bank, raising interest rates to higher levels.
“Reversing globalization is turning tailwinds into headwinds, and political and economic pressures on central banks could increase significantly, which in turn could lead to higher time-consistent equilibrium inflation,” Rogoff said at the event on Wednesday.
The comments suggest that the stimulus measures that helped the economy emerge from the global financial crisis and the coronavirus pandemic more than a decade ago are being abandoned. To stimulate the economy, policymakers pushed borrowing costs to near zero or even lower and used new monetary tools such as quantitative easing.
Now, these measures undermine the central bank’s authority to fight inflation, Rogoff said. He also suggested that economists are too complacent about the trends that are happening now.
Lagarde’s rate plan wins ECB’s backing, but big rate hikes are still in play
Earlier this week, hawkish officials initially warned that the ECB president’s signal of two quarter-point rate hikes in July and September appeared to rule out a bigger move, with several policymakers announcing their support for her plan. route map.
They include two colleagues on Lagarde’s executive committee, who back a timetable that also includes a halt to bond purchases in the weeks following the June 9 decision.
ECB Deputy President Luis de Guindos said on Wednesday the timetable was “very sensible”, while Chief Economist Philip Lane described it as “clear” and “strong policy.” Meanwhile, the hawkish Dutch central bank governor Klaas Knot announced that “I fully support everything in the blog,” Lagarde wrote on Monday.
He later added that raising interest rates by 50 basis points in July to immediately hit zero would “obviously not be ruled out”, insisting the option was in line with her plan. Such tightening would echo the Fed’s increased aggressiveness on inflation when it raised rates this month.
Compared to its global peers, the ECB has been embracing the tightening policy for longer, arguing that the surge in consumer prices is mainly caused by supply shocks, such as the surge in energy costs following the Russia-Ukraine conflict. But surprisingly fast inflation nearly quadrupled the 2 percent target, prompting officials to pledge to act.
U.S. drivers begin to hesitate over record gasoline prices
While U.S. gasoline was earlier expected to remain strong this summer, it now appears that gasoline demand is starting to show signs of cracking as prices soar.
Gasoline demand just fell to its lowest level since mid-2013 for four straight weeks, and that doesn’t include 2020, when consumption collapsed due to the pandemic. U.S. gasoline demand fell by nearly 5% compared to 2021 levels, according to the U.S. Energy Information Administration.
The pullback cast doubt on earlier expectations for this summer’s peak driving season, with Auto Club AAA predicting that this rebound in demand could be subdued with a near-daily streak of record oil prices over the past two weeks. Last month, the EIA warned that high gasoline prices could limit some leisure travel this summer.
Average U.S. oil prices rose to a record $4.599 a gallon on Tuesday, 51% higher than a year earlier, according to AAA. In California, the price is over $6 a gallon.
“Data over the past three weeks shows that consumption is still struggling to overcome higher prices as we head into the summer driving season, greatly offsetting April’s increase in demand,” said BNEF analyst Danny Adkins.
U.S. egg prices set to rise 21% this year as bird flu hits the U.S.
Egg prices are set to rise further as egg production in the U.S. market plummets to a seven-year low amid the worst-ever bird flu outbreak.
Compared with a year ago, the price of eggs in the U.S. market will rise 21%, the largest increase of any staple food tracked by the U.S. Department of Agriculture.
The outbreak of bird flu has affected more than 38 million poultry in the United States, reducing both laying bird numbers and table egg production to their lowest levels since 2015.
The cost of oil and fat products is also rising, with the USDA raising prices by 11% in the past year.
Stock Markets Are Too Volatile, Even Low Volatility ETFs Are Not a Safe Haven
Even exchange-traded funds that promise to offer investors some degree of protection from volatility have not escaped the turmoil in the stock market.
While the ETF focuses on stocks with less price volatility, its own volatility has reached its highest level in two years as soaring inflation, rising interest rates and geopolitical turmoil create uncertainty over the economic outlook.
The two largest funds in the industry, the $26.6 billion iShares MSCI U.S. Minimal Volatility Factor ETF (symbol USMV) and the $10.2 billion Invesco S&P 500 Low Volatility ETF (symbol SPLV), their 30 Day volatility jumped to its highest level since June 2020.
“Investors should remember that low or minimal volatility doesn’t mean no volatility,” said Ben Johnson, global head of ETF research at Morningstar. “These are still equity portfolios and won’t provide the same level of protection from market volatility as high-quality bonds.”
edit/emily
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