Five reasons to still worry about inflation
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FIVE REASONS TO STILL WORRY ABOUT INFLATION
Markets have spent all year worrying about inflation, and while price rises are nearly back at target, and at it in several markets, Deutsche Bank thinks there is still some reason to worry, particularly in the U.S.
They point out investors are already pricing in more inflation in the coming years as the 10 year Treasury yield US10YT=RR is up more than 50 bps from its intraday mid-September low, and the 5 year US inflation swap USCPIZ5Y= has seen its biggest five week rise in 18 months.
And there are five reasons why inflation risks are rising, Deutsche says:
- Monetary easing has been greater than expected by major central banks. The Fed cut by 50 bps in September, and markets have added an October rate cut to their ECB expectations.
- Recent weeks have seen a notable pickup in commodity prices because of the geopolitical situation in the Middle East and the stimulus announcements from China.
- The U.S. is not heading for a sharp downturn or recession, as shown by the latest payrolls data.
- U.S. September CPI came in stronger than expected. Core CPI was 0.3% month on month.
- Money supply growth has continued to accelerate. In the U.S., M2 money supply growth was running at +2.0% year-on-year in August, the highest since September 2022.
(Alun John)
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MONDAY'S OTHER LIVE MARKETS POSTS:
UK DOMESTIC BANKS ATTRACTIVE DESPITE BUDGET UNCERTAINTY - UBS CLICK HERE
CHINA’S STIMULUS: HOW MANY TRILLIONS FOR AN EQUITY BOOST? CLICK HERE
EUROPEAN STOCK FUTURES STRUGGLE FOR DIRECTION CLICK HERE
CHINA STIMULUS GETS MIXED REVIEWSCLICK HERE
China's fiscal stimulus plan gets muted reaction https://reut.rs/40369kP
Annual change in China’s consumer prices https://reut.rs/3YlIwCu
European shares mostly higher https://reut.rs/3Y32lNS
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