Despite it being a relatively light week for new economic data, the S&P 500 made a significant move on Thursday. A daily gain of 0.5% pushed that index to a new record high, eclipsing a previous high set five weeks earlier.
An index of U.S. consumer prices rose at a 5.0% annual rate in May, the steepest increase since 2008. The latest monthly report highlights that supply continues to have difficulty meeting the robust pace of demand with businesses struggling to source the physical materials and the human resources required to facilitate operations and this is giving way to price pressure across a number of sectors.
It is expected that the Federal Open Market Committee (FOMC) will keep its benchmark interest rate unchanged as policymakers hold a two-day meeting scheduled to end on 16 June. The recent increase in inflation could ensure concerns of future rate hikes remain top of mind for many U.S. Federal Reserve officials. However, the outsized gains in a few select sectors support the Fed’s view that the current level of price pressures are temporary.
In the U.K. more evidence of a strong rebound as reports showed April GDP rose 2.3% month-over-month, on top of a large March gain, led by activity in the services sector. The Eurozone economy is also in recovery; the European Central Bank (ECB) held monetary policy steady at last week’s meeting, signaling that it is continuing with its accelerated pace of bond purchases for the time being. The ECB kept its Deposit Rate at -0.50% and maintained the size of its Pandemic Emergency Purchase Program (PEPP) at €1.85 trillion, saying that it expects that purchase program to run until at least March 2022. CLICK HERE