Global markets hold their breath for US CPI data
All attention in global markets turned to the consumer price index data to be announced in the USA. While rally pricing attracted attention before the data, Fed Chairman Jerome Powell reiterated his guidance that high interest rates are necessary for a long time.
Global Stock Exchanges are preparing to reach new records as the rise in US stock indices before the CPI data is reflected in Asia.
MSCI All Country World Index has achieved its longest upward streak since January. The S&P 500 index is approaching a record level with a 0.5 percent increase on Tuesday, while futures are up 0.1 percent.
MSCI Asia Pacific index continued to rise after closing Tuesday at a two-year high. While chip manufacturer TSMC leads the rise, Japanese and Australian stock markets are also positive. Chinese mainland indices diverged negatively, while the Hong Kong stock market was closed for a holiday.
Exchange rate and bond markets, which remained calm throughout the week, started the CPI day flat. Bloomberg Dollar Index is at 1,251 points. The US 10-year bond yield was little changed at 4.44 percent. An ounce of gold is flat at $2,360 in the spot market.
‘High interest rates for a long time’ message from Powell
Fed Chairman Jerome Powell emphasized the need to keep borrowing costs high for long, saying they should be patient and wait for evidence that inflation continues to cool.
The Fed Chairman echoed comments he made earlier this month, saying the latest inflation numbers indicate it will take longer than previously thought to achieve the confidence needed to lower interest rates.
“We didn’t expect it to be a smooth road, but these data were higher than I think everyone expected,” Powell said at a Netherlands-based Foreign Bankers Association panel in Amsterdam on Tuesday, referring to the lack of progress in inflation in the first quarter. “What this situation tells us is that we need to be patient and let the restrictive policy do its job.”
“It looks like it will take longer for us to be confident that inflation will come down to 2 percent over time,” Powell added. While Powell emphasized during the panel that current monetary policy “is restrictive by a multitude of measures,” he said the central bank’s next move is unlikely to be a rate hike. Commenting on Powell’s statements, Wilmington Trust chief economist Luke Tilley stated that today’s speech is a great exercise to emphasize the current stance.