Another interesting divergence
-> UST 30Y yields (in red) are soaring -> Inflation long-term market expectations Swap Forward 5Y5Y (in green) are flat since the start of the war... Source: Bloomberg, www.zerohedge
The Bank of Japan delivered a hawkish message.
The Bank of Japan reaffirmed that it will continue raising interest rates as growth and inflation evolve. Yet the yen weakened immediately after the announcement. The market’s verdict was clear: 25 basis points is not enough. Even with the policy rate now at 1.25%, the interest-rate differential remains wide—and so does the incentive to borrow in yen and invest in higher-yielding currencies. If Japan wants to support the yen without hiking more aggressively, it may have to return to FX intervention: selling dollar assets and using its reserves to buy yen. But intervention only buys time. It does not solve the underlying rate gap. The longer the BOJ waits to close that gap, the more aggressive future rate hikes may ultimately need to be. Key details: 1. BOJ voted 7-2 in favour of raising interest rates to 1.25%. 2. BOJ warns underlying inflation could rise above its 2% target. 3. Inflation pressure is spreading from producer prices into consumer prices. 4. Inflation expectations continue to rise. 5. Wage increases are increasingly being passed into selling prices. 6. Weak yen, higher oil prices and strong AI-related demand are adding inflation pressure. 7. Japan’s economy is still recovering moderately, supported by employment, income growth and AI-related demand. 8. CPI is expected to accelerate clearly above 2% from the second half of FY2026. 9. BOJ still says financial conditions remain accommodative despite the hike. 10. Future hikes will depend on economic activity, prices and financial conditions. Governor Ueda’s remarks will be closely watched for clues on the timing and pace of further hikes. Source: Bull Theory
U.S. CPI HELD STEADY, in line with expectations. Core CPI MoM came in above estimates. Wall Street will open nicely higher
• Headline CPI YoY: 3.4% vs. 3.4% expected and prior • Core CPI YoY: 2.4% vs. 2.4% expected and 2.5% prior Core inflation cooled from last month, but matched forecasts. Traders now see about 90% chance of a Fed RATE HIKE on September. CPI YoY: 3.4% vs 3.4% est CPI Core YoY: 2.4% vs 2.4% est CPI MoM: 0.4% vs 0.4% est CPI Core MoM: 0.3% vs 0.2% est Source: Coinbureau
Is a growth scare coming?
In green -> US economic inflation data surprises In red -> US economic growth data surprises Source: zerohedge
Different presidents. Different parties. Same direction.
More money printing. More debt. Higher prices. Source: Charlie Bilello
Switzerland retains $93.28 of every $100 from 2019.
The OECD gap tells a wider inflation story. E.g, the value left from a $100 budget stands at $77.16 in the U.S. In Turkey, you would have $10.93 left... Source: OECD cumulative inflation data, December 2019 to April 2026 Antony Martini
In the US, fear of rising prices is climbing toward record highs as the U.S. saving rate collapses to 2.6%.
Source: Hedgeye
Wall Street has predicted inflation would return to 2% for 64 straight months. It has been wrong every time.
Yesterday, New York Fed President John Williams said he expects inflation to ease in the second half of this year and decline further next year. That is also the consensus view on Wall Street. The chart tells a different story. For the past 64 months, Bloomberg's survey of around 70 economists has consistently projected core PCE inflation would return to roughly 2% within the next six quarters. It never happened. Before the pandemic, forecasts generally expected inflation to rise back toward target. Since COVID, the opposite has been true: economists have repeatedly predicted inflation would fall to 2%, yet core PCE has remained persistently above target and has even trended higher over the past 18 months. The key question is whether this time is genuinely different. If the same forecast has missed reality for more than five years, investors should ask what has fundamentally changed that would finally make it accurate. Source: Jim Bianco
