DAX is waiting for a signal from New York – US producer prices even deflationary
With stoic composure, the German stock index is waiting for a rally signal from Wall Street, which will not come. So the index continues to stick to the 15,700 mark, neither up nor down is going much these days. But US indices are making progress. Advances related to another inflation puzzle piece.
US producer prices fell 0.5 percent month-on-month in March, the most in three years. Deflationary tendencies among producers. This is an encouraging sign for the US Federal Reserve and also for investors, who continue to speculate on the Fed’s next rate hike.
In principle, there is no longer any justification for the Fed to raise interest rates any further. Instead, it should consider lowering interest rates to nip any potential threats to the economy in the bud. On the other hand, it is known that inflation comes in spurts, which is why the Fed’s current lead should serve as a good buffer. However. There is progress on the inflation front and an imminent pause in the rate hike cycle seems more than possible.
On the other hand, the labor market remains robust. There is almost full employment, the unemployment rate is just 3.5 percent. Other indicators such as the participation rate continue to improve. So at some point the Fed will have to choose between the welfare costs of weakening the labor market and the welfare gains of a timely return to the 2% inflation target.
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