Yellen sees rate rises soon

<p>Kia ora,</p><p>Welcome to Wednesday'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 stimulus and strong trade growth may spark rate rises, and that is according to Janet Yellen.</p><p>But first, today's <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> has produced some mixed signals, although it is generally positive. The event organisers reported overall prices are "-0.7%" lower, at an average prices of US$4,162/MT. But they reported the previous event average price at US$4,110/MT. So today's result is actually +1.2% higher than that. This makes more sense when you know that the dominant WMP price rose +0.7% and the also-large SMP rose +2.0%. Dragging the result lower was Butter which slumped 12.1% and Cheddar Cheese down +4.5%. But the relative volumes sold of those two are pretty small. Anyway, in NZD terms, this has resulted in a dip of just -0.1%.</p><p>US <a href="https://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf" target="_blank"><strong>factory orders</strong></a> for March disappointed. They came in +1.1% higher than for February and that was much less growth than analysts had expected. New orders for Capital goods actually fell -3.2% on that basis. (Recall, the year-on-year data suffers from pandemic base effects, so is not a reliable indicator at present.)</p><p>US Treasury Secretary Yellen <a href="https://www.wsj.com/articles/yellen-says-interest-rates-may-have-to-rise-to-keep-economy-from-overheating-11620151101?mod=hp_lead_pos3" target="_blank"><strong>commented</strong></a> overnight that inflation could well rise as a result of the Biden recovery and stimulus programs. Rates may have to rise "to prevent overheating". She is no lightweight and markets took notice. Meanwhile she plans to borrow nearly <a href="https://home.treasury.gov/news/press-releases/jy0158" target="_