US DATA: CPI Dispersion Metrics Point To Only Mild Uptick For Core Goods
Jun-11 13:49
- Taking a step back, dispersion metrics of CPI inflation saw a mild uptick with 33% of ~190 items in the overall basket growing in excess of 3% Y/Y vs 29% in April.
- It’s the highest since February and before that May 2024, with the share having bottomed out at 28% in December. For context, it averaged 24% in 2019 or 19% in 2015-19.
- The same analysis for core goods saw the >3% Y/Y share rise from 14% to 19% in May for its highest since Feb and before that Apr 2024. As noted in the details, whilst there were multiple large increases in M/M rates for some specific items, there were also some surprisingly weak readings elsewhere.
- Further, whilst the latest level is above the 12% averaged in 2015-19, it’s only back to the 18.5% seen just in 2019, having peaked at 75% in 2022.
- The share of core services items growing >3% Y/Y largely consolidated an impressive recent drop, only rising 1pp to 51% having been at 63% in February. However, it averaged 38% in 2019 or 34% in 2015-19.
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BOE: Mann looks at gaps of restrictiveness rather than estimating neutral
May-12 13:45
- Mann noted that its "very interesting" to try and pin a level on the neutral rate "but it's off stage for me, my monetary policy horizon is three years. I face a tremendous amount of nominal activity and nominal changes and nominal transmission of my nominal policy rate to the economy and so quite a bit of why I focus on these different measures of real rate gap, the nominal rate gap, the inflation expectations gap, is because all of those things are important to me during over my monetary policy Horizon, it's true, if I never had a deviation from Target, in other words, expected inflation equal to my target, then the real rate gap and the nominal rate gap are the same, and a lot of problems go away. But that has not been true, and I don't expect it to be true going forward, because volatility in particular, and risk premia volatility and its implications for inflation, and as it is observed in financial market, risk premia are going to be part of my environment of monetary policy making, so I can't sort of assume away the annoying things that make the real rate the focus of a theoretical exercise."
- "I think it's very important to take from financial markets and from businesses and households, what what they observe in terms of their degree of restrictiveness. So there's a tendency to look at these gaps and say, those gaps are going to tell me about restrictiveness. Those are what I what I look at is the outcome of monetary policy stance as it is transmitted through financial markets which are global, absolutely, and are affected by other actors out there who are contributing to financial assets. And I have to take those and reflect upon what are the outcomes in terms of restrictiveness, the inflation process, the degree of economic activity. So it's the outcomes of restrictiveness, as opposed to measuring restrictiveness, per se."
GILTS: UBS Recommend Selling Futures Roll
May-12 13:36
Looking to the M5/U5 gilt futures roll cycle (M5 goes first notice on May 29) UBS recommend selling M5 and buying U5 as they deem there to be “significant switching potential - especially for the front contract - and our positioning indicator suggests a mild long positioning bias”.
EQUITIES: Program buyer on the Open
May-12 13:34
- Program buyer on the Open, notable, but far from a big one, 1577 names, was the most since last Thursday.
- Futures are seeing selling interest on the Cash Open, now fadding off their best earlier levels.
