IMF’s Gopinath:It will be challenging to bring inflation back to Fed target w/o turbulence

IMFThe IMF’s Gita Gopinath is weighing in on the US economy and  inflation  saying:

  • it will be challenging to bring inflation back to Federal Reserve target without turbulence
  • The relevant question is not whether inflation peaked, but whether it will stay significantly above the Fed’s target for a long time
  • Based on current projections, US inflation could stay above Fed’s target for a long time, there is risk of inflation expectations that the anchoring
  • There is a narrow path for US rates not to go up by much, but risk is the possibility of much a steeper rate increases

Not great news from IMF’s Gopinath on US inflation going forward

European major indices close lower on the day

  • German DAX, -110.61 points or -0.76% at 14446
  • France’s CAC -51.72 points or -0.8% at 6448.84
  • UK’s FTSE 100 -5.93 points or -0.08% at 7593.01
  • Spain’s Ibex unchanged at 8842.71
  • Italy’s FTSE MIB -133 points or -0.55% at 24233

Looking around other markets as London/European traders look to exit shows:

  • Spot gold is trading up $5.68 or 0.31% at $1857.60.
  • Spot silver is down 5.5 cents or -0.25% at $22.19
  • WTI crude oil futures are higher despite a surprise build at the weekly inventory data. Crude oil is trading at $21.50. That’s up $2.10 on the day
  • Natural gas traded to a new cycle high at $9.65 today. It is currently trading at $9.58 up $0.25 or 2.68%. That is still not good news for inflation
  • The price bitcoin trades at $30,473 – near the middle of the days trading range. The low for the day came in at $29,831 while the high for the day was at $31,310.

US weekly crude oil inventories +2025K vs -1917K expected

  • Prior was -5068K
  • Gasoline -812K vs +1075K expected
  • Distillates +2592K vs +1060K expected
  • Cushing -1593K vs +256K prior

API data released late yesterday:

  • Crude +1845K
  • Gasoline +1821K
  • Distillates vs +3376K
  • Cushing vs -1839K

There is a bit of evidence of some loosening in the crude market here but it’s one week of data. Gasoline remains extremely tight with inventories 10% below the long-term average.

Eurozone Q1 final GDP +0.6% vs +0.3% q/q second estimate

  • GDP +5.4% vs +5.1% y/y second estimate

The upwards revision may look positive at first glance but the details are less rosy. The better-than-estimated growth in Q1 was largely driven by a rise in exports (+0.4%) and stocks (+0.6%), offsetting the drop in government expenditure (-0.1%) and household consumption (-0.3%). The material impact from the Russia-Ukraine conflict is more likely to be felt in Q2, so just be wary of that.

Coming up on Wednesday, 8 June 2022 – The OECD will publish its latest Economic Outlook

The report will be published during Europe/US time today. I don’t have an exact time.

The OECD bill it as:

  • The OECD will publish its latest Economic Outlook, containing analysis and projections for the world economy, OECD member countries, G20 countries and key partners

What they really mean is they’ll be sounding the alarm bells, again, on inflation rocketing higher right around the globe. And keeping interest rate hikes ahead on the radar. The European Central Bank meet Thursday. Most analysts expect a bit of a placeholder meeting ahead of aggressive hikes beginning in July. Ee’ll see.

US Treas Sec Yellen told senators that she expected inflation to remain high

U.S. Treasury Secretary Janet Yellen was speaking during a Senate Finance Committee hearing. Yellen told the Senators:

  • the United States was dealing with “unacceptable levels of inflation,”
  • “I do expect inflation to remain high although I very much hope that it will be coming down now,”

Reuters carry the report, adding:

  • ellen repeatedly rejected Republican assertions that inflation was being fueled by Biden’s $1.9 trillion American Rescue Plan (ARP) COVID-19 spending legislation last year.
  • “We’re seeing high inflation in almost all of the developed countries around the world. And they have very different fiscal policies,” Yellen said. “So it can’t be the case that the bulk of the inflation that we’re experiencing reflects the impact of the ARP.”

US has banned investors from buying any Russian debt or stocks in secondary markets

This via Reuters ICYMI, citing US Treasury guidance on its latest sanction published on its website, and an official from the department:

  • The US Treasury Department has banned U.S. money managers from buying any Russian debt or stocks in secondary markets
  • This is in addition to existing bans on new-issue purchases
  • the new ban extends to all Russian debt and that all Russian firms’ shares are affected, not just those of ones specifically named in sanctions
  • “Consistent with our goal to deny Russia the financial resources it needs to continue its brutal war against Ukraine, Treasury has made clear that U.S. persons are prohibited from making new investments in the success of Russia, including through purchases on the secondary market,” a Treasury spokesperson said on Tuesday.

More details are here at the Reuters report.

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