The resilience of the
US economy and stickiness of price pressures spurred a reassessment of the
trajectory of Fed policy. This sparked a sharp rise in US interest rates and
extended the dollar’s advance. The somewhat disappointing April jobs report and
a softer CPI report in the middle of May could signal that the interest rate
adjustment is over. Federal Reserve Chair Powell played down the likelihood of
the need to lift rates again, and as it was in Q4 23, when CPI moderated to a 2%
annualized rate, the central bank is being prudent in both directions. The IMF identified US fiscal policy
as a key to fueling demand, inflation, and the stronger greenback, which has
heightened concern among several countries in the Asia Pacific region,
including Japan, South Korea, China, and Indonesia.
2024-05-04