Dawn chorus: US inflation hits 29-year high

US CPI up 5.0% in May vs year ago; core inflation of 3.8% highest since 1992; but financial markets not worried & bet central banks will ignore spike as temporary; US 10 yr bond yield falls to 1.47%


TLDR & TLDL: US consumer price inflation figures out overnight show a spike to a 29-year high in May, but financial markets have lost their fear — for now — of an inflation-driven spike in interest rates in the world’s largest economy. They’re betting the US Federal Reserve and the European Central Bank will see the spike as temporary and keep printing money to keep rates low for a couple more years to come.

Here in New Zealand, the pause in our travel bubble with Melbourne has been extended for another seven days to next Wednesday. Australian testers found a Covid-positive family from Victoria broke border restrictions and travelled through New South Wales to Queensland, infecting a few and being in contact with others, who are still being found and tested.

Briefly in our political economy

Yeah nah… An IAG NZ survey released late yesterday found 79% of respondents see the Government as being responsible for taking action on climate change, up from 65% in 2018. But only 31% of respondents agree the Government and councils should raise rates and taxes to do it.

Tills beeping loudly: In another signs that consumers are feeling spendy, Stats NZ reported yesterday seasonally adjusted electronic card transactions for retail spending rose 2.3% or $189min May from April. This was the first month since June 1 lifting of the first lockdown that spending rose in all categories and the first time there were three consecutive months of rises since July last year.

Briefly in the global political economy

Times are a changin’ Canada’s Keystone XL pipeline to send oil from tar sands in Alberta to America’s Gulf Coast refineries was finally cancelled completely yesterday after Joe Biden cancelled a cross-border permit. (NPR) It’s been a bad couple of weeks for big oil. Shell lost a big European court case ordering it to reduce emissions, climate activist hedge funds got directors onto the board of Chevron and G7 Finance Ministers agreed rules to force banks and companies to disclose their carbon exposures.

Still printing hard: The European Central Bank pledged overnight with its latest forecats and monetary policy decision to carry on printing money to buy bonds to keep longer term interest rates close to 0%, despite upgrading its inflation and growth forecasts overnight. It still has €700b left in its plan to buy €1.85t of bonds. The ECB lifted its inflation forecast to 1.9% from 1.5%, but said it remained below its 2% target and the current spike in inflation was temporary. (CNBC)

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