Inflation and the central bank reactions

<p>Kia ora,</p><p>Welcome to Wednesday’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>Today we lead with news it's all about inflation and policy interest rates today.</p><p>American <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>CPI inflation</strong></a> was up +8.5% in March, driven by rising petrol prices. This was almost exactly as markets had expected, and is a rise from +7.9% in February. Their 'core inflation' (without food or energy costs) was up +6.5%, a similar rise to what was recorded in February, and also the rise markets had expected. The lack of any surprise in this data has induced something of a relief in financial markets. But we should note that at these levels, American consumer prices are rising faster than anywhere else in the G7 major advanced economies, even in the EU.</p><p>However, because American inflation didn't surprise on the upside, financial markets pulled back on their interest rate bidding, and the US dollar slipped slightly.</p><p>The US retail expansion rolls on, with <a href="http://www.redbookresearch.com/" target="_blank"><strong>a key survey</strong></a> showing it rising at its second highest rate in the past six months, and far more than can be accounted for by inflation.</p><p>The US Treasury offered another tranche of <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2022/R_20220412_1.pdf" target="_blank"><strong>10 year bonds at auction today</strong></a>, a smallish US$34 bln was offered and that attracted bids of US$83 bln. However, the median yield for the winning bids was 2.62%, up sharply from 1.84% at <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2022/R_20220309_2.pdf" target="_blank"><strong>the prior event</strong></a> a month ago.</p><p>Even the American <a href="https://fiscal.treasury.gov/files/reports-statements/mts/mts0322.pdf" target="_