Dear valued client,
The U.S. CPI report indicates an uptick in consumer prices, resulting in markets finishing in red territory for the week. Inflation came in at 3.5% in March (compared to 3.2% in February and 3.1% in January). These figures surpassed expectations, prompting concerns among investors who now anticipate a delay in interest-rate cuts. Market indices reacted with a slight decline, diverging from previous speculation of a potential rate cut at the June Federal Open Market Committee meeting. The persistence of high inflation, fueled by factors like gas, rents, and auto insurance, presents a challenge for the Federal Reserve’s monetary policy considerations. Analysts now project a later timeline for rate adjustments, with September emerging as a probable timeframe, and the proximity to the presidential election adds an additional layer of complexity to monetary policy decisions.
On our side of the border, the Bank of Canada maintained its policy interest rate for the sixth consecutive time, holding steady at 5%. There’s growing confidence that inflation is gradually returning to its target, coupled with an upgraded forecast for economic growth. While acknowledging the potential for a rate cut as early as June, Governor Tiff Macklem emphasized the need for sustained progress towards price stability before any definitive action is taken. This stance reflects the bank’s cautious approach, prioritizing long-term economic stability.
Recent developments in Gaza have made ceasefire negotiations more troublesome, with implications for regional stability. Despite efforts in Cairo involving delegations from Israel, Qatar, and the U.S., no progress was reported following Hamas’ rejection of Israeli demands. Prime Minister Benjamin Netanyahu announced plans for an offensive in Rafah, Gaza’s last refuge for displaced Palestinians, further complicating the negotiation landscape. The escalation in tensions was exacerbated by an Israeli airstrike targeting the sons of Hamas’s top political leader, Ismail Haniyeh, along with claims of collateral damage involving the leader’s grandchildren. These events underscore the fragility of the situation and the urgent need for diplomatic intervention to prevent further escalation and alleviate humanitarian suffering.
“The stock market is a device to transfer money from the impatient to the patient.” – Warren Buffett
Have a terrific weekend,
PW
