Lede

Inflation rates in the US have hit an inflection point with the Consumer Price Index showing a significant deceleration, leading some economists to believe that the Federal Reserve could feel less pressure to stabilize prices through aggressive interest rate hikes.

Summary

• US Consumer Price Index has shown a significant deceleration since it shot up by 9% in June 2022, currently standing at 5%, the lowest it has been since May 2021.
• Some economists believe that inflation rates of around 5% are the point at which inflation is no longer considered an emergency issue.
• A recent study by the economics department at the University of Massachusetts Amherst found that there was no significant economic pullback with inflation targets around 5%.
• An analysis of stock performance by BlackRock dating back to 1920 found that as long as inflation doesn't cross 10%, equities continue to perform relatively well.
• While the Federal Reserve maintains a target inflation rate of 2%, some economists believe that the Fed will not act even if inflation floats above that target while remaining relatively low.
• There is a 67% chance that the Fed will raise rates by a quarter percentage point at its next meeting in May.
• Last month's collapse of Silicon Valley Bank and Signature Bank raised fears of a possible wider banking crisis but the broader US banking system remains sound and stable.
• The two regional banks that failed were "poorly managed" and "took unacceptable risks," according to White House economic adviser Lael Brainard.
• Klaas Knot, chair of the Financial Stability Board, wrote in a letter that crises at US regional banks and Credit Suisse in March originated from "within the financial system."
• Andrew Bailey, governor of the Bank of England, said that regulators could now place stricter liquidity requirements on lenders.