May 10,2018
United States:
KKR Co-Founder Expresses Optimism About U.S. Economy, Fed Moves
Henry Kravis, co-founder of private equity firm KKR & Co., is upbeat about the U.S. economy this year and next, and says the Federal Reserve is doing the right thing getting back to normal. “Interest rates are starting up but they are still very low, relatively speaking; there is plenty of capital available, banks are in much better condition today than they were back in 2007,” he said to reporters in Tokyo. “I don’t see anything today on the horizon in the U.S. that says we are going to go into a big downturn quickly. I think 2018 is going to be fine, I think actually 2019 will be fine.”
Europe:
Carney Says Modest BOE Rate Hikes Needed Even as Inflation Cools
Mark Carney said the Bank of England still intends to deliver “modest” tightening after an unexpected economic slowdown derailed an interest-rate hike that investors had anticipated as soon as this month. The governor was speaking after officials kept the key interest rate on hold at 0.5 percent after a first-quarter slump, and said inflation will weaken faster than previously anticipated. Money markets shifted to no longer fully price in an interest-rate increase this year. “We think the momentum in the economy is going to reassert,” he told reporters in London. “The Monetary Policy Committee judges that an ongoing, modest tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target.” The MPC voted 7-2 to hold the rate steady, as predicted by all but three of 54 economists in a Bloomberg survey. Ian McCafferty and Michael Saunders reiterated their support for an immediate increase. Money markets now show the probability of an August increase in borrowing costs as only about 50 percent, and a hike by the end of the year — previously fully priced in — at about 85 percent. Sterling initially declined but recouped some of those losses as Carney spoke. It was down 0.2 percent at $1.3527 as of 12:58 p.m. in London.
Asia
China April producer inflation picks up for first time in seven months
China’s producer inflation picked up for the first time in seven months in April, bolstered by surging commodities prices and suggesting its industrial demand remains resilient even as trade tensions ratchet up with the United States. But consumer inflation eased from the previous month as food prices rose at a slower pace, official data showed on Thursday. Analysts and investors are closely watching inflation gauges in China for signs of a long-expected economic slowdown that would weigh on industrial profit growth and investment and possibly tip a shift in central bank policy. But the country’s commodity futures markets are notoriously speculative, making it difficult to tell if producer price swings are pointing to a real change in underlying demand. The producer price index (PPI) rose 3.4 percent in April from a year ago, accelerating from a 17-month low of 3.1 percent in March, the National Bureau of Statistics (NBS) said on Thursday. On a month-on-month basis, it declined 0.2 percent. Analysts polled by Reuters had expected producer inflation would rebound to 3.5 percent as steel mills stocked up on raw materials such as iron ore and coking coal to meet a seasonal surge in construction. Oil prices have also been on the rise. Sharper factory-gate price rises could bolster profits for industrial firms, which saw earnings growth slow to the weakest pace in over a year in March. The consumer price index (CPI) rose 1.8 percent from a year earlier, just below expectations and slowing from March’s 2.1 percent. On a month-on-month basis, it dipped 0.2 percent. The core consumer price index, which strips out volatile food and energy prices, rose 2.0 percent in April, unchanged from March. The food price index rose 0.7 percent on-year, after rising 2.1 percent in March, as distortions from the long Lunar New Year holiday receded. Non-food prices rose 2.1 percent, the same pace as the previous month. Pork prices in April declined 16.1 percent on-year, most likely due to a glut in the market.