A look at the day ahead in markets from Sujata Rao
There it is: an admission from a central banker that rapid policy tightening may cause a hard landing for economic growth — Federal Reserve Governor Chris Waller described rate hikes as a “blunt force” tool that may act like a “hammer”, causing collateral damage to the economy.
Well, markets at least have already been enduring the collateral damage. Global stocks are down 8.5% this year while Treasury 10-year yields are up around 130 basis points. Yields climbed on Tuesday to a new three-year high, while German 10-year borrowing costs are already at seven-year peaks.
The worst of the growth damage is still confined to Europe. Germany’s ZEW investor confidence index due later in the day is projected to fall further, after last month posting the biggest monthly drop on record.
The hope now is that the threat of rate hikes and tighter financial conditions will start to put a lid on inflation. March U.S. consumer inflation is expected later on Tuesday at above 8 year-over-year, following a 7.9% reading for February.
U.S. factory inflation, on Wednesday, is seen surging above 10%, though many reckon this could be the peak. In any case the data is likely to seal a 50 basis-point Fed rate hike next month.
Inflation expectations rise https://graphics.reuters.com/USA-FED/CONSUMER-EXPECTATIONS/gdpzyjgxevw/chart.png
Inflation pressures are everywhere, in fact, even in Japan which earlier in the day reported record wholesale price growth,…
