US inflation rate hit a new 40-year high

The release of the US CPI figures showed a further acceleration in the inflation rate in March 2022 at 8.5% yoy, which was the largest year-on-year gain since December 1981. Surging gasoline prices were the main contributor of this sharp increase, but food and services also made strong contributions. A 50 basis points interest rate hike from the Federal Reserve at its next monthly meeting on May 3-4 looks definitely validated. However, if core inflation accelerated further to +6.5% yoy, it came out slightly below expectations. Smaller increase in the prices of some goods may point to demand destruction due to purchasing power losses.

China’s trade balance data published overnight highlighted the negative impact of the zero-Covid strategy which triggered significant port congestion and logistical bottlenecks. Imports fell 0.1% yoy in March for the first time since August 2020 and exports growth slew down to 14.7% yoy, down 16.3% yoy in the first two months of 2022.

On the agenda today, UK inflation figures should confirm the same acceleration observed in the US yesterday while March industrial production figures in the EU and Italy could confirm the ongoing industrial slowdown due to supply chain issues and surging prices for raw materials.