The Federal Reserve is likely to announce in August or September a strategy for reducing its massive bond buying program, but won't start cutting monthly purchases until early next year, a Reuters poll of economists found. A significant number of Fed watchers also said the central bank would wait until later in the year before announcing a taper, now the main focus for markets fretting over rising inflation as an end to the pandemic in the United States is in sight. Booming demand with the U.S. economy reopening is expected to continue and push up consumer prices this year, with = Reuters poll of over 100 economists showing an upgrade to both growth and inflation forecasts.
Reopening U.S. economy fuels inflation, labor market recovery
U.S. consumer prices rose solidly in May, leading to the biggest annual increase in nearly 13 years as a reopening economy boosted demand for travel-related services, while a global semiconductor shortage drove up prices for used motor vehicles. The number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months. May's inflation drivers appear to be temporary, fitting in with Federal Reserve Chair Jerome Powell's repeated assertion that higher inflation will be transitory. The inflation jump partly reflected the dropping of last spring's weak readings from the calculation. May was probably the peak in the CPI, with these so-called base effects expected to level off in June.
China central bank chief says inflation under control, vows 'normal' monetary policy
China's central bank governor said inflation is "basically under control", and monetary policy would be kept steady, in comments a day after concerns over inflationary pressures were fanned by data showing the fastest rise in factory-gate prices in 12 years. "We must adhere to policy stability as a priority, and stick to implementing normal monetary policy," Yi Gang told a financial forum in Shanghai on Thursday, forecasting this year's inflation at below 2%. "Keeping interest rates at a proper level is conducive to the stable and healthy development of the markets," the People's Bank of China (PBOC) governor said. Yi said that China's interest rates, though higher than major economies, are still relatively low among developing and emerging economies.
Dollar marooned as investors shrug off inflation spike
The 10-year government bond yield (interpolated) on the previous trading day was 1.81, +0.00 bps. The benchmark government bond yield (LB31DA, 10.5 years) was 1.81, +0.50 bps. LB31DA could be between 1.78-1.83. Meantime, the latest closed US 10-year bond yields was 1.45%, -5.00bps. USDTHB on the previous trading day closed around 31.16 Moving in a range from 31.09-31.14 this morning. USDTHB could be closed between 31.06-31.15 today. Meantime, After a week of anxious waiting, markets got the high U.S. inflation number they dreaded, shrugged it off and moved on - leaving the U.S. dollar under pressure and most majors stuck in ranges.
Sources : Bloomberg, CNBC, Investing, CEIC
