As the second quarter gets underway, the biggest question is when soaring inflation will finally peak.
On Wednesday, minutes of that Fed meeting should show how policymakers view the outlook. They’ve already flagged bigger rate hikes to tame inflation, which is at four-decade highs. Also key would be details on how quickly the Fed might reduce its $9 trillion balance sheet, a risk some believe markets are underestimating.KIM KYUNG-HOON/Reuters
And there’s a collateral casualty of the BOJ’s uber-easing: the yen, which has plumbed depths not seen since 2015. While the BOJ maintains a weaker currency is overall positive for the economy, jawboning by a queue of government officials suggests a differing view. Now? Though the war in Ukraine rages on and interest rates are on the up, the S&P 500 is back to within 5% of its all-time high, MSCI World has recovered half of its drop and the Nasdaq is down a more manageable 8%.
The rise is partly down to capital controls that have suppressed ruble selling and artificially inflated the currency. But there is also a genuine improvement in Russia’s balance of payments as imports collapse and soaring energy prices increase export revenues. Yields across the bloc ended March with their biggest monthly surge in around a decade, on expectations the ECB will soon push its minus 0.5% depo rate to 0% and above.