Investment Institute
Weekly Market Update

Take Two: US inflation rises more than expected; ECB hints it may cut rates soon

  • 15 April 2024 (3 min read)

What do you need to know?

US annual inflation rose more than expected to a six-month high of 3.5% in March from 3.2% in February, raising questions over when the Federal Reserve (Fed) will start cutting interest rates. Higher fuel and housing costs drove the increase, while core inflation, which excludes food and energy, remained unchanged at 3.8%, though that masked an acceleration in services prices. Market expectations of Fed rate cuts shifted to only fully pricing-in a move by September, envisaging two cuts this year. AXA IM now expects three cuts this year, starting in July but with risks skewed to fewer cuts and a later start.

Around the world

The European Central Bank (ECB) left interest rates on hold but gave a strong indication it would be ready to start cutting soon, if inflationary pressures continue to fall. It said in a statement that if its updated inflation outlook – due by the ECB’s next meeting in June - were to “further increase its confidence that inflation is converging to the target in a sustained manner”, it would be appropriate to ease monetary policy. Elsewhere, ratings agency Fitch downgraded its outlook on China’s sovereign credit rating from stable to negative, reflecting risks to public finances from “more uncertain economic prospects”.

Figure in focus: $1.8trn

The space economy is expected to triple in value to $1.8trn by 2035, growing at an average annual rate of 9% and outpacing global GDP growth, according to the World Economic Forum and consultancy McKinsey & Co. Spanning satellites and rockets to navigation and data services, five industries - supply chain and transportation, food and beverage, defence, retail and consumer goods and digital communications - will generate upwards of 60% of the space economy’s growth, they said. Space technology will also play an increasingly important role in monitoring the impacts of climate change and responding to natural disasters.

Words of wisdom

Enhanced Geothermal Shot: A US clean energy initiative aiming to harness heat from the Earth, using technology to create reservoirs below the planet’s surface. Next-generation geothermal power offers a minimal carbon footprint, flexible generation and storage and broad geographic availability, according to the US Department of Energy. It aims to reduce the cost of enhanced geothermal systems by 90% to $45 per megawatt hour by 2035, to bring affordable clean energy to over 65 million US homes. Elsewhere, Europe’s energy infrastructure needs €800bn of investment by 2030, rising to €2.5trn by 2050, to meet climate goals, according to a report from the European Round Table for Industry.

What’s coming up?

The International Monetary Fund and World Bank’s Spring Meetings commence on Monday and continue throughout the week. China reports first quarter GDP growth on Tuesday while the UK issues unemployment figures for February and Canada publishes inflation data. The Eurozone and UK will publish their own inflation rates on Wednesday, while Japan will follow with its inflation figures on Friday.

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    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

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