Yellen Calls Republican Delays In Approving Ukraine Aid Inexcusable

Alex

Economic

Political

Russia-Ukraine Conflict

Summary:

U.S. Treasury Secretary Janet Yellen on Wednesday underscored the Biden administration's commitment to provide Ukraine with the budgetary and military assistance it needs, while calling Republican delays in approving the aid inexcusable.

Yellen made the comments after meeting with Ukrainian Prime Minister Denys Shmyhal and Finance Minister Serhiy Marchenko. Their meeting followed a Ukraine conference held on the sidelines of the International Monetary Fund and World Bank spring meetings.

She said the officials discussed their shared priorities, including global financial support for Ukraine, Ukraine’s reform progress, and Russia’s obligation to pay for the damages of its war of aggression.

"Budgetary assistance from the United States is more critical than ever, as it is inextricably linked to Ukraine’s success on the battlefield and the government’s ability to deliver essential services to its people," Yellen said.

She said Washington and its allies have provided significant support to Ukraine since Russia's invasion in February 2022, with extensive controls and safeguards in place to ensure the money reached the right people and was being used appropriately.

Yellen hailed the U.S. Senate for passing additional funding for Ukraine on a bipartisan basis and said the failure of Republicans in the U.S. House of Representatives to act so long "has been inexcusable and detrimental to our national security."

"Every moment of delay by House Republicans strengthens (Russian President Vladimir) Putin and emboldens America’s adversaries around the world who are closely watching to see if ... the United States, maintains its resolve to support a democratic Ukraine as it fends off an autocratic Russia," she added.

Shmyhal underscored the urgency of the U.S. aid in remarks after the meeting, saying Russia was determined to undermine Ukraine's economy with attacks on infrastructure, including its power grid, ports, farms and factories.

"There is a risk of even greater destruction. If Russia destroys Ukraine's economy, it will cripple the Ukrainian state to the point where it cannot defend itself on the battlefield," Shmyhal said.

He said Ukraine was ready to work with all parties including the World Bank to ensure the transparency of U.S. aid and was aiming for "zero tolerance" of any potential misuse.

Yellen lauded Ukrainian officials for maintaining economic stability and implementing ambitious reforms under what she called incredibly difficult circumstances.

She said Washington and its allies needed to remain vigilant to ensure that Russia was unable to acquire the goods and resources it needed to continue its war, and said the coalition would keep raising costs on Russia through sanctions, while working to clamp down on evasion networks around the world.

Shmyhal said the U.S. and its allies needed to strengthen sanctions aimed at reducing Russia's ability to wage war, adding: "specifically, it is necessary to completely block the supply of Western technologies to the Russian military industrial complex."

He also called for sanctions against the entire Russian banking sector and Russia's nuclear sector.

Shmyhal said he also expected the U.S. Congress to pass the "Repo Act," which would grant the Biden administration the authority to confiscate frozen Russian assets to support Ukraine.

Source：Reuters

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Samantha Luan

Economic

Stocks

US Equity Markets: FOMC Members and Yields

On Wednesday, corporate earnings, concerns about the Middle East, and expectations of a more hawkish Fed rate path impacted risk sentiment. Tech stocks bore the brunt of the pullback.

On Wednesday, the Dow declined by 0.12%. The Nasdaq Composite Index and the S&P 500 saw losses of 1.15% and 0.58%, respectively.

Asian Economic Calendar: Aussie Labor Market Data and the BoJ

On Thursday, Australian labor market data could influence the RBA rate path. Economists forecast Australian employment to increase by 7.2k in March after surging by 116.5k in February. Moreover, economists predict the Australian unemployment rate to increase from 3.7% to 3.9%.

A deterioration in labor market conditions could impact wage growth and reduce disposable income. Downward trends in disposable income could curb spending and dampen demand-driven inflation. The RBA could begin discussions about interest rate cuts if the outlook for spending deteriorates.

Beyond the Aussie labor market data, the RBA Bulletin and Bank of Japan commentary also need consideration.

The Australian employment numbers could impact the ASX 200 more. However, Bank of Japan forward guidance on the BoJ interest rate path could influence buyer demand for the Yen and Nikkei-listed export stocks. Bank of Japan Board member Asahi Noguchi is on the calendar to speak.

Commodities: Crude Oil, Gold, and Iron Ore

On Wednesday, WTI crude and gold (XAU/USD) ended the session with losses of 3.13% and 0.92%, respectively. Demand concerns impacted crude oil prices, with the markets also reacting to the weekly US inventory numbers. Profit-taking likely contributed to the losses as investors monitor news updates from the Middle East.

However, iron ore prices advanced by 2.74% on the Singapore Futures Exchange.

The USD/JPY, the Intervention Zone, and the Nikkei

The USD/JPY fell by 0.21% to end the session at 154.382. Downward trends in the USD/JPY could impact buyer demand for Nikkei-listed export stocks. Intervention threats remain another consideration, with the USD/JPY holding onto the 154 handle.

The Futures Markets

On Thursday, the ASX 200 was up 20 points, whereas the Nikkei was down 120 points.

ASX 200

The ASX 200 declined by 0.09% on Wednesday. Gold-related stocks and tech stocks limited the losses. The S&P ASX All Technology Index (XTX) rose by 0.09%.

Gold stocks Northern Star Resources Ltd. (NST) advanced by 0.66%, with Evolution Mining Ltd (EVN) rallying 7.49%.

Bank stocks and mining stocks had mixed sessions. ANZ Group Holdings Ltd. (ANZ) and Westpac Banking Corp. (WBC) saw gains of 0.04% and 0.12%, respectively. Commonwealth Bank of Australia (CBA) and National Australia Bank Ltd. (NAB) declined by 0.23% and 0.63%, respectively.

BHP Group Ltd (BHP) and Fortescue Metals Group Ltd. (FMG) ended the session down 1.18% and 0.12%, respectively. Rio Tinto Ltd. (RIO) advanced by 0.02%.

However, oil stocks ended the session in negative territory. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) saw losses of 1.17% and 0.12%, respectively.

Hang Seng Index

On Wednesday, the Hang Seng Index gained 0.02%. Real estate and tech stocks contributed to the gains. The Hang Seng Tech Index (HSTECH) rose by 0.07%, with the Hang Seng Mainland Properties Index (HSMPI) gaining 0.12%.

Tencent (0700) and Alibaba (9988) fell by 0.33% and 0.66%, respectively.

However, bank stocks had a mixed session. HSBC (0005) declined by 0.40%. China Construction Bank (0939) and Industrial Commercial Bank (1398) advanced by 0.42% and 0.50%, respectively.

The Nikkei 225

Hang Seng Index, Nikkei Index, ASX 200: Aussie Stats, the BoJ, and the Fed_3

The Nikkei extended its losses from Tuesday, falling by 1.32%.

Bank stocks continued to trend lower. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) declined by 0.89% and 1.13%, respectively.

It was also a negative session for the main components of the Nikkei.

Sony Group Corporation (6758) slid by 2.09%. KDDI Corp. (9433) and Softbank Group Corp. (9948) saw losses of 1.63% and 1.33%, respectively.

Fast Retailing Co. Ltd. (9983) and Tokyo Electron Ltd. (8035) ended the session down 0.44% and 0.98%, respectively.

For upcoming economic events, refer to our economic calendar.

Source: FX Empire

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Samantha Luan

Economic

Amid a flurry of commentary from global financial leaders at the International Monetary Fund and World Bank Spring meetings in Washington, and with many markets having undergone huge moves in recent weeks, investors are taking a bit of a time out.

The relentless bond selling of late reversed on Wednesday and pushed yields lower, gold flatlined again, oil tumbled 3% for its biggest fall in over two months, and stocks wobbled.

Whether it's fatigue (gold), short-covering (bonds), worries about the impact of higher borrowing costs on growth and demand (stocks and oil), or just seeking refuge from the barrage of headlines from Washington, investors are trimming back risk.

This is the backdrop to Thursday's market open in Asia, where the calendar includes Japan's tertiary index of industrial activity, unemployment from Australia and Hong Kong, and a speech by Bank of Japan board member Asahi Noguchi.

On the equity front, the correction that appears to be developing in some quarters gathered momentum on Wednesday, despite a notable decline in bond yields and the dollar's first daily loss in seven.

Japan's Nikkei 225 index is down 3.6% this week, on course for its biggest weekly drop since December 2022. The S&P 500 fell for a fourth day, is on track for its third weekly loss in a row, and is down 5% since its all-time high last month.

The MSCI Asia ex-Japan index is down year-to-date. Investors Take Breather, FX Plots Thicken_1

Investors Take Breather, FX Plots Thicken_2

Exchange rates - and by extension trade competitiveness, restrictions, and tariffs - remain under close scrutiny.

President Joe Biden on Wednesday called for sharply higher U.S. tariffs on Chinese metal products, duties of up to 25% on certain steel and aluminum products, in a move that will risk angering Beijing.

Finance leaders from the United States, Japan and South Korea, meanwhile, agreed to "consult closely" on FX markets in their first trilateral meeting on Wednesday, nodding to concern by Tokyo and Seoul over their currencies' recent sharp declines.

The agreement in their first trilateral meeting came as receding expectations of a near-term U.S. interest rate cut pushed the yen to 34-year lows, keeping markets on alert on the chance of yen-buying intervention by Japanese authorities.

"We will continue to cooperate to promote sustainable economic growth, financial stability, as well as orderly and well-functioning financial markets," a joint statement read.

While Japan may not be actively trying to export its way to prosperity, and the yen's weakness may be justified on relative economic and interest rate fundamentals, seismic terms of trade shifts like this in Asia tend not to go unmatched.

Could Asia be sliding towards a 'beggar thy neighbor' wave of competitive FX depreciation? The trilateral U.S.-Japanese-South Korean statement shows officials are acutely aware of the risks.

Here are key developments that could provide more direction to markets on Thursday:

- IMF/World Bank meetings in Washington

- Australia unemployment (March)

- BOJ's Noguchi speaks

Source: Reuters

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Samantha Luan

Economic

In just a few days, India will commence the world’s largest democratic election.

An estimated 960 million people in a country of 1.4 billion are eligible to vote in the polls, which start on Friday and will take more than a month to complete. Narendra Modi is widely expected to clinch a rare third consecutive five-year term as prime minister.

Under his leadership, India is poised to become a 21st-century economic powerhouse, offering a real alternative to China for investors and consumer brands hunting for growth and manufacturers looking to reduce risks in their supply chains.

While ties between Beijing and the West are becoming increasingly frayed, India enjoys healthy relations with most major economies and is aggressively wooing large companies to set up factories in the country.

So, is the hype around Modi’s India, which remains a largely impoverished country, justified?

The quality of economic data in India can be unreliable, which makes it tough to evaluate the reality on the ground in the world’s most populous nation.

But by using data from official or authoritative sources, CNN has created five charts to show how the country has performed since Modi first rose to power in 2014, and to look ahead at the challenges the next leader will face in managing the world’s fastest growing major economy.

Still very poor

India’s economy was worth $3.7 trillion in 2023, making it the world’s fifth largest, having jumped four spots in the rankings during Modi’s decade in office.

India is one of the world's fastest-growing economies

India’s per capita GDP grew by 55% between 2014 and 2023. The country also went from the ninth largest economy in the world to the fifth largest within that time period, and it also experienced the largest growth in GDP compared to other major economies.

Can India Become An Economic Superpower? _1

The South Asian giant’s economy is comfortably placed to expand at an annual rate of at least 6% in the coming few years, but analysts say it should be targeting growth of 8% or more if it wants to become an economic superpower.

Sustained expansion will push India higher up the ranks of the world’s biggest economies, with some observers forecasting the country to become number three behind only the US and China by 2027.

However, India could do much more to raise its gross domestic product (GDP) per person, a measure of living standards according to which it ranked a lowly 147 in 2022, according to the World Bank.

According to Guido Cozzi, professor of macroeconomics at the University of St Gallen in Switzerland, there will be “trickle down effects on per-capita GDP” as the economy grows. But he cautioned that “trickle-down economics is not guaranteed to reduce income inequality, and policies that promote inclusive growth may be necessary.”

Building modern India

Much as China did more than three decades ago, India is beginning a massive infrastructure transformation by spending billions on building roads, ports, airports and railways. Meanwhile, private investors are building the world’s biggest green energy plant.

In this year’s federal budget alone, $134 billion was carved out for capital spending to boost economic expansion.

The results can be seen on the ground with furious construction underway across the nation. India added nearly 55,000 kilometers (around 35,000 miles) to the national highway network, an increase of 60% in the overall length, between 2014 and 2023. Infrastructure development has many benefits for the economy, including creating jobs and improving the ease of doing business.

Modi is spending billions on connecting India

India's national highway network has steadily expanded, increasing by 60% in the last decade. Can India Become An Economic Superpower? _2

In recent years, the country has also built a range of tech platforms — known as digital public infrastructure — that have transformed lives and businesses.

For example, the Aadhaar program, launched in 2009, has provided millions of Indians with proof of identity for the first time ever. The world’s largest biometric database has also helped the government save millions by reducing corruption in welfare initiatives.

Another platform, the Unified Payments Interface (UPI), allows users to make payments instantly by scanning a QR code. It has been embraced by Indians from all walks of life, from coffee shop owners to beggars, and allowed millions of dollars to flow into the formal economy.

In September 2023, citing a World Bank report, Modi said that thanks to its digital public infrastructure “India has achieved financial inclusion targets in just six years which would otherwise have taken at least 47 long years.”

Stock market superpower

The excitement around India’s growth potential is reflected in its stock market, which has been hitting record highs. The value of companies listed on India’s exchanges surpassed $4 trillion late last year.

India has two major exchanges: the National Stock Exchange of India (NSE) and the BSE, Asia’s oldest bourse formerly known as the Bombay Stock Exchange. Can India Become An Economic Superpower? _3

Can India Become An Economic Superpower? _3

Thanks to the sizzling rally, the NSE has overtaken both the Shenzhen Stock Exchange and the Hong Kong Exchange to become the world’s sixth largest bourse, data from the World Federation of Exchanges showed in January.

Domestic investors, both retail and institutional, have been driving India’s stock market to unprecedented peaks.

According to Macquarie Capital, retail investors alone own 9% of India’s equity market value, while foreign investors are at slightly less than 20%. Analysts, however, expect foreign investments to pick up in the second half of 2024, once the election is out of the way.

Humming factories

The Modi government is aggressively trying to capitalize on the massive rethink underway among companies on supply chains. International firms want to diversify their operations away from China, where they faced obstacles during the pandemic and are threatened by rising tension between Beijing and Washington.

Asia’s third largest economy has launched a production-linked incentive program worth $26 billion to attract companies to set up manufacturing in 14 sectors, ranging from electronics and automobiles to pharmaceuticals and medical devices.

As a result, some of the world’s biggest firms, including Apple (AAPL) supplier Foxconn, are expanding their operations significantly in India.

Billionaire Elon Musk said last week on X that he is “looking forward” to meeting Modi in India, without giving a date. The Tesla (TSLA) boss is expected to announce a major investment in India soon, with the automaker reportedly scouring the country for a suitable location for its first Asian factory outside China. Can India Become An Economic Superpower? _4

Can India Become An Economic Superpower? _4

Until two years ago, Apple would typically start assembling models in the country only seven to eight months after launch. That changed in September 2022, when Apple started making new iPhone 14 devices in India weeks after they went on sale.

Analysts have called the change in strategy a big win for Modi, as growing manufacturing ties with a US giant like Apple will in turn attract other global players in the electronics manufacturing ecosystem to India.

According to market research firm Canalys, up to 23% of iPhones will be made in India by the end of 2025, up from 6% in 2022.

Where are the jobs?

Still, India’s economy, much like its democracy, is far from perfect. If re-elected, Modi has to tackle the enormous challenge of creating hundreds of millions of jobs for a population that remains largely impoverished.

With an average age of 29 years, India has one of the youngest populations globally, but the country is not yet able to reap the potential economic benefits from its large, youthful population. Can India Become An Economic Superpower? _5

Can India Become An Economic Superpower? _5

According to a report last month by the International Labour Organization, educated Indians between the ages of 15 and 29 are more likely to be unemployed than those without any schooling, which reflects “a mismatch with their aspirations and available jobs.”

Youth unemployment rates in India are now higher than global levels, it added.

The unemployment rate for young Indians with a graduate degree was over 29%, almost nine times higher those who can’t read or write, the report said.

“The Indian economy has not been able to create enough remunerative jobs in the non-farm sectors for new educated youth labour force entrants, which is reflected in the high and increasing unemployment rate,” it added.

Source：CNN

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Samantha Luan

Economic

In a speech, Jefferson said he expects inflation to continue to slow this year. But he omitted a reference to the likelihood of future rate cuts that he had included in a previous speech in February. Instead, he said his outlook is that inflation will cool even with the Fed’s key rate “held steady at its current level.”

If elevated inflation proves more persistent than he expects, Jefferson added, “it will be appropriate” to keep rates at their current level “for longer” to help slow inflation to the Fed’s 2% target level. U.S. consumer inflation, measured year over year, was most recently reported at 3.5%.

Jefferson’s remarks appeared to open the door to the prospect that the Fed will dial back its forecast, issued at its most recent policy meeting in March, that it would carry out three quarter-point cuts this year to its benchmark rate, which stands at about 5.3%. Chair Jerome Powell is scheduled to speak later Tuesday and may comment on the Fed’s potential timetable for rate cuts.

In February, Jefferson had said that should inflation keep slowing, “it will likely be appropriate” for the Fed to cut rates “at some point this year” — language that Powell has also used. Yet that line was excluded from Jefferson’s remarks Tuesday.

Fed officials have responded to recent reports that the economy remains strong and inflation is undesirably high by underscoring that they see little urgency to reduce their benchmark rate anytime soon. Wall Street traders had long expected the central bank to cut its key rate at its June meeting but now don’t expect the first reduction before September.

On Monday, the government reported that retail sales jumped last month, the latest sign that robust job growth and higher stock prices and home values are fueling solid household spending. Vigorous consumer spending can keep inflation elevated because it can lead some businesses to charge more, knowing that many people will pay higher prices.

In his speech Tuesday, Jefferson said the Fed estimates that its preferred inflation gauge, which will be reported next week, rose in March, to 2.7% from a year earlier, up from 2.5% in February. Such an increase would echo a rise in the more widely followed consumer price index, which rose to 3.5% in March, from 3.2%.

“While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done,” Jefferson said.

For a look at all of today’s economic events, check out our economic calendar.

Source: Fortune

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Alex

Economic

Political

President Joe Biden is calling for higher tariffs on Chinese steel and aluminum, part of a series of steps to shore up the American steel sector and woo its workers in this year’s election.

In a visit to Pittsburgh on Wednesday, Biden will propose new 25% tariffs on certain Chinese steel and aluminum products as part of an ongoing review, while the US also launches a formal probe into China’s shipbuilding industry. Biden will reiterate that United States Steel Corp., based in Pittsburgh, should remain American-owned.

The steps target a relatively small segment of the US market, with imports of Chinese steel and aluminum totaling roughly $1.7 billion in 2023. But US officials said the announcements were designed to head off an expected surge and safeguard the US market.

“The president understands we must invest in American manufacturing, but we also have to protect those investments and those workers from unfair exports associated with China’s industrial overcapacity,” Lael Brainard, director of the National Economic Council, told reporters.

The broadside comes as the administration continues its review of tariffs imposed on China by ex-president Donald Trump, which Biden has largely kept in place.

Biden plans to speak to 200 union members at the headquarters of the United Steelworkers, a trip heaped in symbolism as the union leads opposition to Nippon Steel Corp.’s $14.1 billion acquisition of US Steel.

The president last month ratcheted up his opposition to the deal. Biden will repeat those comments Wednesday, saying it is “vital” for US Steel “to remain an American steel company that is domestically owned and operated,” according to a White House statement.

The head of the Steelworkers Union, Dave McCall, has opposed the current terms of Nippon Steel’s deal, drawing support from Biden and other political figures.

“I’ll talk to him about the issue we face with Nippon, maybe talk to him about the shipbuilding petition we put in, and thank him for the infrastructure bill and IRA, as we’re starting to get some of that funding for the companies that need it and some of their future employers,” McCall said in an interview Tuesday.

Action Details

Biden on Wednesday is calling for raising Section 301 tariffs on a wide range of Chinese steel and aluminum — namely, products that currently have 0% or 7.5% tariffs should be each raised to 25%. Rates on products already subject to 25% tariffs wouldn’t change.

The final decision would rest with the US Trade Representative, Katherine Tai, and come after the ongoing review of Section 301 tariffs is concluded, an official familiar with the plans said, speaking to reporters on condition of anonymity. The administration hopes to see the results soon, the official said.

The increase of metal tariffs on China comes as imports from the nation for years have been uneconomic for domestic buyers. The combination of current tariffs under Section 301, Trump-era tariffs under Section 232 and other existing anti-dumping and countervailing duties effectively eliminated Chinese imports of steel and aluminum.

Chinese steel imports topped out at nearly 3 million tons in 2014, data from the US Census Bureau show. But the country accounted for just 600,000 metric tons of steel imports in 2023, for a value of $900 million, out of total US steel imports of 25.6 million tons.

US imports of Chinese aluminum totaled 200,000 metric tons worth $750 million, out of total imports of 5.46 million tons.

Tai’s office will also launch a formal review of China’s maritime, logistics and shipbuilding sector, a probe that a group of five major union groups sought last month. Biden “believes it is critical to understand China’s uniquely aggressive set of interventions in these sectors,” the White House said in the statement.

Biden will also direct his team to work with Mexico to curb efforts to route Chinese steel into the US through the country. An official familiar with the matter demurred when asked whether Mexican tariffs had been ruled out, saying that instead the administration wants to work with Mexico and reach a joint resolution.

Wednesday is the second day of Biden’s three-day swing through Pennsylvania, a crucial electoral state that’s home to US Steel and the United Steelworkers. It’s also Biden’s birth state — he visited his childhood home in Scranton on Tuesday after a speech criticizing Trump’s tax policy as benefiting only the rich.

The USW has endorsed Biden, though Trump also has support among the union’s rank and file.

“I appreciate him coming to talk to our members. It’s about secure jobs. Enforcement of trade laws are important, but for them to be important you need real industrial policy that dovetails with it,” McCall said. “It’s not just steel, but tire and rubber, supply chain issues, paper, all the other critical infrastructure stuff we represent around the other various industries.”

Source：Bloomberg

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Damon

Central Bank

Economic

2022 was not a prosperous year for most economies worldwide. It was a year marked by the most severe inflation in decades, affecting everyone, especially in developed countries like the United States and the European Union, where inflation rates approached 10% in 2022.

However, fast forward to 2024, the International Monetary Fund (IMF) indicated in its latest World Economic Outlook report that inflation is expected to decrease to 5.8% in 2024 and further decline to 4.4% in 2025. Current inflation reports from various countries show a significant slowdown compared to the peak levels. Then how will inflation evolve in the future?

How Inflation Receded

As depicted in the figure, we can broadly categorize the countries into the following regions: North America, including the US and Canada; Europe, encompassing the Eurozone, United Kingdom, Germany, France, and Italy; followed by independently grouped Russia, Australia, India, and Japan.

Both the US and Canada reached their inflation peaks in June 2022, with the US recording 9.1% and Canada recording 8.1%. A comparison of this month's inflation shows that in the US, inflation mainly surged in energy commodities (up 60.6% year-on-year) and energy services (up 19.4% year-on-year), followed by food (up 10.4% year-on -year) and the new vehicles (up 11.4% year-on-year). Canada's inflation situation was largely similar.

Most European countries reached their inflation peaks around October 2022, with the UK hitting 11.1%, Italy 11.84%, and Germany 8.8%. Additionally, France peaked in February 2023, recording 6.6%.

Japan reached its inflation peak of 4.3% in January 2023, Australia peaked at 8.4% in December 2022, and India reached its peak of 7.79% in April 2022. Lastly, Russia hit a peak of 17.8% in February 2022.

The main cause of high inflation in many countries stems from the escalation of the Russo - Ukrainian War starting in 2022, leading to global supply chain disruptions (both Russia and Ukraine being major producers of commodities). As crude oil and food prices surged, inflation further rose.

Furthermore, the ongoing chip shortage in 2022 continued to impact global automotive price inflation. Across the global marketplace, a multitude of multinational automotive giants, including Toyota, Honda, and Ford, witnessed a contraction in production capacities, leading to a situation where newly manufactured cars lacked essential microchips upon assembly in factories. This resulted in a period of undersupply in the automotive sector, adding upward pressure to inflation.

By 2023, the monetary tightening policies implemented by various countries, including raising interest rates and reducing market liquidity, restrained further inflationary pressures. This measure to some extent slowed down the money supply, thereby curbing inflation.

The recovery of supply chain disruptions and the decline in commodity prices effectively eased supply-demand imbalances, reducing upward pressure on commodity prices. Moreover, the decline in energy prices, especially oil and natural gas prices, also contributed to the global decline in inflation.

Finally, the slowdown in economic growth expectations of major economies led to a deceleration in demand-side growth, further driving down prices of goods and services.

The Current State of Inflation

The global progress in combating inflation over the past year has been evident, but the momentum seems to have stalled in the first few months of this year.

In particular, inflation persists stubbornly in the US and Canada. In March, the US CPI rose by 3.5% year-on-year, exceeding market expectations of 3.4% and the previous value of 3.2%. The core CPI rose by 3.8% year-on-year, also surpassing market expectations of 3.7%. Meanwhile, Canada's CPI rose by 2.8% year-on-year in February, slightly lower than the previous value of 2.9%.

Recent inflation stubbornness is primarily driven by rising gasoline prices, while food prices and housing rents also contribute to upward inflationary pressures.

In comparison to North America, the Eurozone has experienced a slightly faster deceleration in inflation. According to recent data released by Eurostat, the Eurozone's CPI grew by 2.4% year-on-year in March, lower than the expected 2.5% and the previous value of 2.6%. The growth rate of food and tobacco slowed down to 2.7% (from the previous value of 3.9%), followed by non-energy industrial goods, which saw a year-on-year growth rate of 1.1% (down from 1.6%). Energy prices, however, slightly rebounded from the previous value of -3.7% to -1.8%.

Looking at individual countries within the Eurozone, inflation trends have diverged. Germany and France have seen a slight decline in inflation rates, with the former recording 2.2% and the latter recording 2.3%. Italy's inflation has slightly rebounded from 0.8% in February to 1.3% in March. Overall, inflation is still trending downwards.

Furthermore, the UK recorded a CPI of 3.4% year-on- year in February, the lowest level since September 2021, lower than market expectations of 3.5% and the previous value of 4%. According to the UK's Office for National Statistics, the decrease in food prices helped to lower inflation, but upward pressure on inflation was exerted by gasoline prices and housing.

Philip Lane, Chief Economist of the European Central Bank, stated that the downward trend in the Eurozone's CPI is unlikely to be a smooth decline. Due to base effects in the energy sector, it is expected that overall inflation will fluctuate around the current level in the near term.

Australia saw a 3.4% year-on-year increase in inflation in February, unchanged from the previous value. Housing prices remained at 4.6%, but within this category, housing rents rose by 7.6%, reflecting strong demand and a lack of supply in the rental market. Food and non-alcoholic beverage prices recorded a year-on-year increase of 3.6%, lower than the previous value of 4.4%. Prices of tobacco and alcohol also decreased, recording 6.1%, lower than the previous value of 6.7%.

In Japan, CPI rose by 2.8% year-on-year in February, a significant rebound from the previous value of 2.2% and the first acceleration in four months. The main reason for the overall inflationary trend was the narrowing contraction in energy prices due to the reduction in government subsidies on energy costs. Additionally, the core CPI rose by 2.8% year-on-year, far exceeding the previous value of 2%. This increase was mainly attributed to rising prices of food and durable goods, as well as an increase in accommodation prices reflecting increased demand for tourism.

Kazuo Ueda, Governor of the Bank of Japan, stated in a recent speech that he is confident in achieving the inflation target, and the Bank of Japan will temporarily maintain an accommodative monetary policy.

Russia recorded inflation of 7.7% in March, unchanged from the previous value. India's inflation in February remained almost unchanged as well, recording 5.09%, compared to the previous value of 5.1%.

In retrospect, it is evident from the above discussion that the terms "energy" and "housing" inflation appear frequently in the inflation situations of various countries, indicating that these two factors are the driving forces of current inflation in major global economies.

Subsequent Evolutionary Path of Inflation

To envision the subsequent evolution of inflation, understanding the driving factors behind energy and housing inflation is crucial.

In March, the average spot price of Brent crude oil was $85 per barrel, rising by $2 per barrel compared to February, marking the third consecutive month of increase.

One contributing factor to this price hike is the escalating geopolitical risks. The conflict in the Red Sea severely disrupted international shipping, forcing some vessels to take longer routes to evade danger, thereby increasing costs and pushing prices higher. It's worth noting that recent geopolitical tensions in the Middle East seem to be escalating, which could also have spillover effects on energy prices, further exacerbating inflation.

What's more, the production cuts by OPEC+ countries are still ongoing. Saudi Arabia, which has the largest surplus production capacity, has extended its plan to reduce daily production by 1 million barrels until June 2024, keeping production levels at 9.5 million barrels per day and halting plans to expand oil production capacity.

In addition to the above factors, the decline in US crude oil inventories is also a contributing factor. The American Petroleum Institute (API) report showed a decrease of 2.29 million barrels in US crude oil inventories last week, while gasoline and distillate inventories (such as diesel and heating oil) also decreased. Moreover, the extreme cold weather experienced by the US earlier this year and recent export restrictions imposed by Mexico have partially interrupted the crude oil supply, further driving up oil prices.

However, as the OPEC+ production cut agreement expires and seasonal factors affecting the US subsides, crude oil supply is expected to recover, which could lead to a stabilization of inflation. The biggest uncontrollable factor currently remains geopolitical conflict risks, especially recent conflicts in the Middle East. If these conflicts continue to escalate, they may exacerbate inflation, whereas de-escalation could push inflation downwards.

When it comes to housing inflation, the surge in structural housing demand post - pandemic has significantly elevated rental inflation. Currently, robust housing demand across major economies globally continues to propel rent increases. Although restrictive monetary policies have been restraining rental inflation, it seems that rental inflation will not experience the rapid decline envisioned by central bank officials in the coming months, given the lack of thorough improvement in housing supply conditions on the supply side.

Under restrictive interest rate conditions, the median home price in the US has now risen to $418,000. Behind the skyrocketing home prices lies the fact that all costs, from land and construction workers to building materials and furniture, are on the rise. In other words, the rise in housing prices is essentially driven by the increase in its underlying costs.

Moreover, the current high interest rates are dissuading potential home sellers from listing their homes and from relinquishing the low mortgage rates they secured in the past, which exacerbates the shortage of housing inventory, thus driving up prices. The affordability crisis is also a major factor contributing to the current rise in housing prices, as potential buyers are unwilling to purchase properties at current high interest rates.

Looking ahead, a decrease in interest rates may boost housing demand, but inventory may still be constrained. The impact of increased demand on housing prices may further escalate due to exacerbated inflation. In other words, under the current high-interest - rate environment, housing inflation cannot be restrained. If major economies lower interest rates without curbing inflation, it will significantly increase housing price inflation.

Currently, various countries are at the juncture of interest rate cuts. The Bank of Japan ended its negative interest rate policy on March 19, and the Swiss National Bank lowered its policy rate by 25 basis points on March 21. François Villeroy de Galhau, Governor of the Bank of France, recently stated, "We (the ECB) should, barring major shocks or surprises, decide on a first rate cut at our next meeting on June 6."

Interest rate cuts are likely to bring a series of inflationary risks such as demand-pull inflation and cost-push inflation. Demand - pull inflation may occur when the economy is at full employment, interest rate cuts may lead to overheating of total demand, thereby driving up price levels. Cost-push inflation may arise as interest rate cuts increase liquidity, leading to asset price increases, which may indirectly drive up price levels through cost channels. In addition, inflation expectations and imported inflation are also risks for future global inflation.

Lastly, service sector inflation is also crucial for the future evolution of inflation. In many areas of the service sector, wages constitute a significant portion of business costs. When labor costs rise, businesses may pass them on to consumers by increasing service prices, thereby driving service sector inflation.

Currently, wage growth in developed countries, especially in Europe and the US, has slowed down but remains at elevated levels. According to the latest analysis report from the US employment website INDEED, the annual wage growth rate in the US slowed to 3.1% in March, holding steady with the pre - pandemic average level of 2019 and far below the recent peak in January 2022. Wage growth has slowed compared to a year ago in nearly all industries, with only half (47%) of industries reporting wages still higher than 2019 levels.

Similarly, in the European region, the situation mirrors that of the US. "Wage pressures are gradually moderating but remain elevated," Philip Lane remarked. Looking ahead, service sector inflation is expected to decrease in the short term, but is forecasted to remain relatively high for most of this year.

In summary, regarding the current overall inflation situation, the overall trend continues to be downward apart from inflation in the energy and housing sectors. The only thing that can be asserted with certainty is that inflation will not turn upward at this point. Housing inflation is poised to remain a significant catalyst for inflation in the coming period. The potential for further inflation decline will largely depend on the supply - demand dynamics of crude oil and whether the current geopolitical situation tends toward balance or easing. Should energy prices decrease, overall inflation will continue to decline even if housing inflation remains stubborn.

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