Nerves ahead of the Fed, but not in a bad way

<p>Kia ora,</p><p>Welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect 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 both benchmark interest rates and equity prices are on the move higher this morning.</p><p>Although all eyes are firmly on the Thursday (NZT) US Federal Reserve meeting, with some positive but nervous energy in anticipation, there have been some other releases worth noting.</p><p>US <a href="https://www.newyorkfed.org/microeconomics/sce#/" target="_blank"><strong>inflation expectations</strong></a> came in sharply higher at 4% in one year which is actually a series high for this survey which started in 2013. If you are older, poorer, or live in the economically booming South, your expectation of much higher prices ahead are even greater. The same survey shows labour market expectations improved, with unemployment and the probability of losing one’s job both reaching series lows. The <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>actual May CPI</strong></a> came in at 5.0% so consumers don't see much moderating and certainly not in the way economists expect from the Fed.</p><p>In India their May inflation <a href="http://mospi.nic.in/sites/default/files/press_release/CPI%20Press%20Release%20May2021.pdf" target="_blank"><strong>surged +6.3%</strong></a> and above the upper band of their central bank's policy comfort zone. The rises in India were broad-based and driven by their recent lockdowns. But normal monsoons and an eventual, gradual easing of their lockdowns are expected to stabilise prices somewhat. A key aspect is food price inflation, which was up +5.2% year-on-year.</p><p>Japan has <a href="https://www.meti.go.jp/english/statistics/tyo/iip/index.html" target="_blank"><strong>reported</strong></a> a good +16% rise in industrial production in April from the same month a year ago, but that is pandemic-distorted. Compared with April 2019, they