US inflation expectations unexpectedly ease. Canadian bridge re-opens. India inflation rises. UK forces BNPL to change some terms.
Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news benchmark interest rates are rising despite the political tensions.
Somewhat surprisingly, American inflation expectations eased a bit in January, falling from 6.0% to 5.8% as the expected inflation over the next year in the large New York Fed national survey. This is the first decline in short-term inflation expectations since October 2020. Similarly, median three-year ahead inflation expectations decreased by 0.5 percentage point to 3.5%. The decline in medium-term inflation expectations was broad-based across age, education, and income groups and is the largest one month decline in the measure since the inception of the survey in 2013.
The yield on the benchmark US 10-year Treasury note rose again to above 2% on Monday and the 2-year/10-year yield curve fell to the flattest since July 2020, as bets for a +50 bps rate hike from the Fed increased again. St. Louis Federal Reserve President Bullard has reiterated his call for +100 bps of hikes by the end of June during the interview on CNBC.
Meanwhile, another Fed official, Esther George from the Kansas City Fed, said the central bank should consider selling bonds from its US$9 tln asset portfolio to address high inflation and guard against harmful effects that can result from raising short-term rates above long-term rates.
Cross-border traffic between Detroit and the Canadian city of Windsor is returning to normal after a bridge crossing the Detroit River reopened following a week of demonstrations.
In India, their inflation rate rose to 6.0% in January, and up from 5.7% in December. Its a seven month high, and food inflation is rising within it.
In the UK, a regulator there has told a set of 'buy now pay later' firms to issue refunds of excessive late-payment fees and rewrite their contracts so the terms are clearer. This ruling affects Afterpay, Openpay, Laybuy and Klarna - three Aussie firms and a Swedish one (in which Aussie bank major CBA has a minor stake).
The UST 10yr yield opens today at 2.00% and +8 bps higher than this time yesterday.
The price of gold starts today at US$1862/oz and up another +US$3 from this time yesterday. Given the political tensions you might have thought the gold price would be rising faster.
And oil prices are holding high at just over US$92/bbl in the US, while the international Brent price is marginally softer at US$93.50/bbl.
The Kiwi dollar will open today at 66.1 USc as the greenback firms. Against the Australian dollar however we have slipped to 92.8 AUc. Against the euro we are holding at 58.5 euro cents. That means our TWI-5 starts today lower at just on 70.8 but that is where it was a week ago.
The bitcoin price is up a minor +0.9% since this time yesterday and now at US$42,679. Volatility over the past 24 hours has stayed modest at +/- 1.5%. Interestingly, a huge surge in crypto ads during the American Superbowl seems to have had virtually no influence in demand or prices - unless it stopped them falling.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.