US inflation cools

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news inflation seems to be cooling in the world's largest economies.</p><p>On Tuesday we noted the retreat of Chinese inflation, today the US is signaling a retreat as well.</p><p>The closely-watched US CPI inflation rate slowed for a ninth consecutive period to 5.0% in March from the same month a year ago, its lowest since May 2021. It was a sharpish drop from 6.0% in February on the same basis, and also came in below market forecasts of 5.2%. It was energy costs that drove the drop (-6.4%), with food prices up +8.5% from year ago levels. The core rate ran at 5.6% and little-changed from February. However if we look at the annualised rates in the recent shift from February to March, that ran at just over a +1% annualised rate overall with food showing no change. Energy costs still fell on that more recent basis and it was rent and medical care that kept the February-to-March rate from falling.</p><p>However, the minutes from the last Fed (FOMC) meeting were out <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20230322.pdf" target="_blank"><strong>saying</strong></a> inflation is still too high and the pressure must be kept on. They are stressing vigilence in the inflation fight. But to be fair there were some voices for a pause.</p><p>Markets liked the inflation result however, and stocks initially rose, bond yields didn't react, and the USD firmed. Perhaps they sense the transitioning to lower inflation is in place and without a hard landing? However, the S&P500 has since slipped into a small negative result with markets subsequently sensing that perhaps more rate rises are possible from the Fed.</p><p>Meanwhile, American <a href="https://www.mba.org/news-and-research/newsroom/news/2023/04/12/mortgage-applications-increase-in-latest-mba-weekly-su