US inflation threatens stock market
We were supposed to be entering a period where inflation was on a downward trend and the stock market could return to “normal” conditions with low growth or perhaps even modest declines.
In fact, the US stock market has been rising relatively rapidly, even though stock prices should have started to fall due to high inflation. Something had to give. And on Wednesday, the stock market regained about 1% of its gains so far this year, as the U.S. Bureau of Labor Statistics reported that the U.S. Consumer Price Index (CPI) rose 3.5% in March 2024. energy) was even higher at 3.8%.
Shelter and gasoline costs were the main drivers of the rise in CPI numbers, accounting for more than half of the 3.5% increase. This was a bright spot in the report as prices for new and used cars fell compared to a year ago. While the cost of groceries remained largely unchanged, prices increased for virtually all services.
US President Joe Biden said: “Today’s report shows inflation is down more than 60% from its peak, but we still have more work to do to lower costs for hardworking families.” There is,” he said. Even though prices for key household goods like milk and eggs are lower than they were a year ago, housing and food prices remain too high. ”
Meanwhile, the Bank of Canada (BoC) decided to keep the policy interest rate unchanged at 5% on April 10, as widely expected. BoC Governor Tiff Macklem said a rate cut in June was “within the realm of possibility”, but he wanted to make sure the recent downward trend in inflation was “not just a blip”. We needed to see further declines in core inflation.
This latest look at US inflation has led some market commentators to speculate that a summer rate hike may be out of the question for our southern neighbor. If the U.S. Federal Reserve continues to postpone lowering interest rates, it will put pressure on the BOC not to do so. This is because a rate cut would cause the value of the Canadian dollar to fall against the US dollar.
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Ed Bastian, CEO of Delta Air Lines, summed up the strong demand: “Consumers continue to prioritize travel as a discretionary investment in themselves. […] We are operating at an even higher level this summer than last year and expect overall fare levels to remain broadly unchanged. ”