Overview
- Following Tuesday’s CPI at 3.8% year over year and Wednesday’s PPI at 6%, investors pulled back expectations for U.S. rate cuts and began to price the risk of higher borrowing costs.
- New York Fed president John Williams said Thursday there is no reason to raise or cut rates now, while Boston Fed president Susan Collins said policy may need to tighten if inflation spreads beyond energy.
- Bond traders pointed to a tougher stance as the 2‑year Treasury yield moved above the Fed’s policy rate and futures shifted toward no 2026 cuts, setting the stage for Kevin Warsh’s first meeting as chair next month.
- In Europe, a June increase looks likely after Bundesbank chief Joachim Nagel warned that price pressures are lasting, and a Reuters poll found most economists expect the ECB to raise at least once more this year.
- The Iran war has squeezed oil flows through the Strait of Hormuz, pushing Brent above $100 and lifting fuel and shipping costs that can pass through to consumer prices and business input costs.