United States:
U.S. Core Inflation Unexpectedly Cools on Autos, Drug Prices
A key measure of underlying U.S. inflation unexpectedly eased in February amid falling prices for autos and prescription drugs, giving the Federal Reserve more room to stick to its plan for being patient on raising interest rates. Excluding food and energy, the so-called core consumer price index rose 0.1 percent from the prior month and 2.1 percent from a year earlier, according to a Labor Department report Tuesday. Those figures trailed the median estimates of economists. The broader CPI rose 0.2 percent from January, the first increase in four months, though the 1.5 percent annual gain missed projections and was the smallest rise since 2016. U.S. stock futures and Treasuries rose while the dollar fell, as the data suggest there’s a greater chance that inflation won’t hold up around the Fed’s 2 percent objective — a development that would discourage policy makers from additional rate increases amid rising risks from weakening global growth. Fed Chairman Jerome Powell made clear Friday that he and his colleagues are in no hurry to adjust interest rates as growth slows and inflation stays subdued. “With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the committee has adopted a patient, wait-and-see approach,’’ he said in a speech in California. Responding to questions, Powell said inflation in the U.S. is low, stable and doesn’t react much to slack in the economy. Policy makers will release updated quarterly projections for interest rates as well as inflation, growth and employment when they gather March 19-20.
Europe:
ECB’s Loan Bazooka May Not Reveal True Firepower for Months
The European Central Bank’s latest stimulus action remains a sketch that could keep investors guessing for months on its true potency. Policy makers got scant applause last week for a new batch of long-term loans for banks widely perceived as meager, but details that would help determine the measure’s firepower are missing. By omitting how much liquidity is available and at what interest rate, the ECB has kept flexibility to decide later on just how much support it’s ready to provide. ECB President Mario Draghi touted the action as stimulus that should make growth in the euro zone’s flagging economy more resilient. He stressed that all current measures — including a pledge not to raise rates through the end of the year — are “data-driven” and can be subsequently adjusted. “The ECB essentially removed the problem of bank funding for the next couple of years, but the ultimate impact on the banking sector and the real economy will depend on the final TLTRO-III details,” according to Banque Pictet & Cie global strategist Frederik Ducrozet. Committees have been tasked to work out details, but there’s no rush to produce them for the ECB’s meeting in April, according to people with knowledge of the matter, who declined to be identified because such matters are confidential. Some terms could be kept under wraps until September, when the new lending program starts. That gives policy makers scope to wait before they decide how generous to be. Some of the latest data — including better purchasing managers indexes and industrial rebounds in France and Italy — suggest the slowdown might ease off this quarter. The ECB cut its growth forecast steeply for 2019, but is assuming a pickup in the second half.
Asia:
Japan’s Manufacturers Say Business Conditions the Worst in Years
Japan’s biggest manufacturers say current business conditions are at the worst in nearly three years, the latest indication the nation’s export-dependent economy is taking a battering in the current quarter. The Finance Ministry’s quarterly business survey, released Tuesday, showed a reading of minus 7.3 for conditions among Japan’s largest manufacturers, the worst result since the second quarter of 2016. The survey also showed sentiment among medium-sized manufacturers was the poorest in nearly five years, while that of small manufacturers was the worst in six years. The readings are the latest in a raft of data pointing to a weak start to 2019 for Japan as China’s slowdown, U.S. trade protectionism and softness in tech demand push down on global growth. Japan’s exports and factory output logged deeper falls in January, while machine tool orders continued their plunge in February. Still, the survey showed that not all firms are fretting yet. Large non-manufacturers had a positive view of conditions.
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