Week in review
- U.S CPI inflation 6.0% y/y, core inflation 5.5% y/y
- Australia unemployment rate falls to 3.5 %
- ECB raises rates 50bps to 3.0%
Week ahead
- U.S. Federal Reserve policy meeting
- Bank of England policy meeting
- Minutes of March RBA meeting
Thought of the week
Inflation in the U.S. continues to decelerate but perhaps not fast enough for the U.S. Fed. The 6.0% y/y for headline CPI and 5.5% y/y for core CPI are well down on the peaks from 2022, but still some way from the Fed’s 2% target. Central to the issue of sticky inflation is shelter costs. These are slow moving prices and occupy a large weight in the U.S. inflation basket. Rental costs are still rising in the U.S., when either measured by actual rents or the derived owners’ equivalent rent. Shelter costs are lagging the reality of the rental market. The inflation basket will only capture rent changes as leases are rolled over which may take some time. Rents have already rolled over in the U.S. and the Zillow Rental Index of advertised rents is well off its peak in year-on-year terms. The approximate six-month lag in this data to the CPI shelter measures may be elongated given the healthy jobs market but inflation rates should fall further this year as this impact feeds through, however, we don’t expect inflation to reach the 2% target anytime soon.
U.S. shelter costs driving sticky inflation
Year-on-year
Source: Factset, BLS, Zillow , J.P. Morgan Asset Management.
Data reflect most recently available as of 17/03/23.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
0903c02a82467ab5