Surging prices have increased the CPI (consumer price index) figures to levels never seen before, which has forced central banks to turn hawkish. In the US, CPI jumped to 8.5% in March, while in the Eurozone, headline inflation jumped to 7.5% in March and core CPI to 3.0%, both of which were expected to remain unchanged today in the final reading.

Although, the FED is ahead of the ECB regarding the monetary policy tightening, having hiked interest rates already and planning to pick up the pace considerably this year, with several 50bps hikes planned. The European Central Bank on the other hand, hasn’t started hiking rates yet and is still keeping them at the low band. ECB member Kazaks mentioned July as the possible beginning for rate hikes as shown below, but the FED will be hiking by 0.50% by then.

ECB Kazaks Comments

• A rate hike is possible as soon as July
• Gradual approach doesn’t mean slow response
• ECB doesn’t need to wait to see stronger wage growth
• Ending APP early in Q3 is possible and appropriate
• 0% is not a cap for deposit rate facility

Today’s PPI (producer price inflation) showed a jump in March. The over 30% increase in annual producer prices is the largest on record. The main jump comes from energy prices, which were seen up 83.8% y/y in March as compared to 10.4% y/y in February. But across the board, price increases were also seen in intermediate goods, non-durable consumer goods, durable consumer goods, and also capital goods.

Germany March PPI

• March PPI +4.9% vs +2.6% m/m expected
• Prior +1.4%
• PPI +30.9% vs +28.2% y/y expected
• Prior +25.9%

That’s a striking jump in producer prices as we are seeing the impact from the Russia-Ukraine conflict seep in. The over 30% increase in annual producer prices is the largest on record. The main jump comes from energy prices, which were seen up 83.8% y/y in March as compared to 10.4% y/y in February. But across the board, price increases were also seen in intermediate goods, non-durable consumer goods, durable consumer goods, and also capital goods. Up, up, and away…

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