– Inflation is no longer a major problem in the US – E24

In March, US inflation figures were more moderate than expected. The chief strategist says the central bank should now start emphasizing other things than price growth.

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Danske Bank chief strategist Anders Johansen says inflation is no longer a major problem in the US.

– feed itfeed itFederal Reserve, US central bank He should start focusing on other things, he says in a commentary shortly after US inflation numbers are released on Wednesday.

Price inflation in the United States was 5 percent in March, compared to the same month a year earlier.

It’s significantly lower than last month, and a bigger drop than economists expected.

That’s 0.1% less than expected, says Johansen.

– I’ll normalize

Johansen points out that core inflation, which ignores food and energy prices, remains high.

At the same time, the chief strategist emphasizes that much of this is the price of rental housing.

Services without housing rent remained unchanged from the previous month.

That’s the number the Fed has been clear it’s focused on, says Johansen.

It indicates a rise in stock prices and a fall in long-term interest rates as a result of the news.

Inflation will return to normal once slower inflationary factors such as housing rents are out of the picture.

Reverse currency war

This is a good development, says Olaf Chen, Storebrand’s Head of Personalization and Global Interest.

– It was a little weaker than expected. The market reaction initially appears to be more than surprising. The immediate reaction in the markets is that interest rates go down and stocks go up. The dollar is weakening, which is a bit of a positive thing.

Now the US central bank is expected to make another jump in interest rates, before moving away from the gas rate.

– There is a high probability that the US Central Bank will raise interest rates again by 19 basis points. There is more than a 50% chance of another rate hike in May. We still have a few weeks to go before a decision is made, and things could happen, but the way it looks right now, he’s talking about another jump in interest rates, he says.

Chen points to the fact that the fear of a banking crisis has subsided by Easter, and that although there have been flashbacks to the financial crisis for a while, it is no longer a pressing issue.

Closer to home, he believes, you can now see that central banks are very concerned about strengthening their currency.

In Europe we now have what I would call a reverse currency war. Central banks are now strengthening the currency so that there is no need to import any more inflation. The European Central Bank (ECB) is expected to pass Norges Bank in terms of interest rates, and the same is true for Sweden. The interest rate differential versus abroad is becoming increasingly important for NB. He adds that the krone is record weak, and the important reason is the interest rate differential.

Good news for the market

– You can see that the US biennial, which is very sensitive to short-term expectations in the key interest rate, immediately fell. So obviously that was good news for the market.

So says Sarah Midtgaard, chief economist at Handelsbanken, shortly after US inflation figures come out. It’s also good news, she points out, that monthly growth is slowing.

It ended at 0.1 percent, but was expected to reach 0.2 percent.

If monthly growth remains high, it may take a long time to reach the 2 percent inflation target. She explains that a monthly increase more in line with the inflation target is a good thing.

According to Midtgaard, the market doesn’t seem to believe in the Fed’s interest rate plan, and it didn’t pick up with today’s inflation numbers.

– The market still expects rate cuts this year, while the Fed says “higher for longer.” The market isn’t quite buying it.