Take Two: Eurozone inflation eases; Fed wants more data before rate decision


What do you need to know?

Eurozone inflation eased unexpectedly to 2.4% in March from 2.6% in February, boosting the case for the European Central Bank (ECB) to cut interest rates. Food, energy and industrial goods drove the headline figure down – while core inflation, excluding food, energy, alcohol and tobacco also fell, to 2.9% from 3.1%. In addition, Eurozone business activity returned to growth in March for the first time in 10 months, according to the composite Purchasing Managers’ Index (PMI). It rose to 50.3 from 49.2 in February – a reading above 50 indicates expansion – as stronger services activity offset a contraction in manufacturing.


Around the world

More data is needed before US interest rates can be cut, and it is too soon to tell whether recent higher-than-expected inflation readings represent “more than just a bump”, Federal Reserve (Fed) Chair Jerome Powell said in a speech. Meanwhile US business activity continued to expand in March with the composite PMI at 52.1, marginally down from February’s 52.5. Elsewhere, a Bank of Japan (BoJ) survey showed service sector optimism rose to a 33-year high in the first quarter, helped by increasing tourism and profits from higher prices, adding to speculation the BoJ could raise interest rates again this year.

Figure in focus: 6.0%

South Asia is set to remain the fastest growing regional economy globally for the next two years, driven by India, the World Bank said as it forecast 6.0% growth for the region in 2024 and 6.1% in 2025. The East Asia and Pacific region is also growing faster than the rest of the world, but slower than before the pandemic, the World Bank said. It expects growth there to slow to 4.5% in 2024 from 5.1% last year and said while recovering global trade and easing financial conditions will support the region, “increasing protectionism and policy uncertainty will dampen growth”. 


Words of wisdom

Inflation Reduction Act: Introduced in the US in 2022, the Inflation Reduction Act (IRA) is designed to increase clean energy investment, cut healthcare costs, and raise tax revenues. It is expected to drive growth and innovation, helping the private sector – and investors – decarbonise emission-intensive sectors. The US saw $239bn in new investment in the manufacture and deployment of clean energy, clean vehicles, building electrification and carbon management technology in 2023, up 38% from 2022 according to research firm Clean Investment Monitor. A record $67bn of this came in the fourth quarter of 2023, a 40% increase on the same period in 2022.

What’s coming up?

On Wednesday, the US issues its latest inflation figures while the minutes from the last Fed meeting are published. Wednesday also sees the Bank of Canada convene to set interest rates; the ECB holds its own monetary policy meeting on Thursday when China publishes its inflation data for March. The UK issues its GDP numbers for February on Friday. 

    Disclaimer

    The information on this website is intended for investors domiciled in Switzerland.

    AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.

    This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.

    AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.

    The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.

    Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.

    AXA Investment Managers Switzerland Ltd.