Inflationists ready to throw in the towel, consumer expectations drop, Moderna vaccine safe for teens, Hungary ready to tighten, another CBRT sack
Fed Governors Reaffirm Inflation Is Transient
Inflationists seem to be ready to throw in the towel. We are supposed to see accelerating growth and increasing pressure on prices, but by now the surge in commodity prices has moderated (copper, lumber, iron ore and even soft grains), the housing market peaked and short-term consumer optimism waned. The inflation debate is not over, but the majority of Wall Street believe it will be transitory.
The Chicago Fed’s Evans noted that the recent rise in inflation did not herald a persistent rise and that he had seen nothing to change his support for the Fed’s stance. Richmond Fed’s Barkin said market measures of inflation have not exceeded the Fed’s target.
US stocks have struggled to hold onto their earlier gains as consumer expectations shifted towards slower growth and easier labor market conditions for months to come.
The Conference Board’s consumer confidence index softened to 117.2 after a downward revision from 117.5. Considering the millions of vacancies available, no one was surprised to see that the current situation has improved to 144.3 from 131.9.
The Expectations Index showed a massive drop from 109.8 to 99.1, which might indicate the peak is being reached for some of the robust data we’ve seen. If growth is already starting to slow, this will support the argument that inflation will be transient.
US new home sales in April fell 5.9% to 863,000. The March reading was a monster impression, so the downward revision from 1.021 million to 917,000 took was taken in stride. The housing market is set to calm down as stocks are tight, home builders face soaring lumber and concrete prices, and finally, as many Americans embrace the return of prepandemic living in the cities. The housing market is still a bright spot for the economy, but the demand driven by COVID has completely disappeared.
The Richmond Fed Manufacturing Index confirmed price trends that emerged from Empire State and Philly Fed surveys. The availability of skills illustrates the labor shortage and will continue to support the idea that the labor market recovery will take longer than everyone expects.
Moderna’s actions rallied after their Phase 2/3 study of its COVID-19 vaccine (mRNA-1273) in adolescents achieved its primary goal of immunogenicity, successfully linking immune responses to adult vaccination .
Moderna is also expected to deliver a single-dose COVID vaccine to India next year.
The Hungarian forint surged after the central bank reiterated its readiness to proactively tighten monetary conditions to the extent necessary to ensure price stability and mitigate inflation risks. Hungarian stocks fell as investors now fully assess a rate hike on June 22nd policy meeting.
Today’s policy decision saw the MNB leave the base rate and overnight deposit rate unchanged at 0.60% and -0.05%, respectively, and overnight guaranteed loan rates. and one week at 1.85%. Hungary’s central bank has become more hawkish since mid-May, determined to fight inflation. The forint surged against the euro after the breakout of 355 and could now head towards 340.
If the Turkish Central Bank had a theme song, it would probably be the LMFAO rock party anthem. Every day, this central bank shakes things up. The Turkish government did it again, another vice-governor, this time Oguzhan Ozbas was sacked and replaced by Semih Tumen. The CBRT is now filled with many inexperienced central bankers (4 out of 7 with less than a year) who will likely support President Erdogan’s monetary policy theories. Turkey’s central bank lost its independence a few years ago, so the impact on the market is diminishing, but remains a catalyst that supports the lira’s long-term bearish outlook.
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