May I forget the Inflation?

[190501] May I forget the Inflation?

⊙ There are many grounds for explaining the recent global low prices such as technology development, diffusion of online distribution, and aging. The prospect that low prices will continue is reflected in the financial market. In the first quarter of the year, $ 35bn in bond ETFs led to a new record. It is also expected that the bond sector ETF market will grow to $ 1 trillion by the end of the year. In the BlackRock, the government bond interest rate could rise to 2.7% this year, but it was not expected to be significantly below 3%. Even after the Federal Reserve 's FOMC, which may seem somewhat hawkish on the surface, however, the rise in US interest rates was not big.

⊙ Is price inflation excluded from variables that should be considered in the financial market now? Since the second half of last year, the growth rate of CPI, core PCE price index etc. has continued to slow down. The price of oil, which was approaching $ 80, dropped to the early $ 40 level, lowered the low inflation rate one step further.

⊙ The situation has changed a bit now. Oil prices have recently risen by almost 50% compared to the beginning of the year. The impact will have to be watched, but food prices in China could rise due to the swine flu in Africa. Even if it is far from inflation, the inflation rate is different from the current low inflation rate.

⊙ The reason we are talking about the Inflation is because the US interest rate has remained too low compared to the oil price. The Fed has eased its stance on the pace, and since February, US interest rates have continued to decline despite rising oil prices. The Fed's stance is shifting its focus to 'neutral', and oil prices have already risen by nearly 50% from the level earlier this year. I expect US interest rates to rise in the short term and slow down the global stock market's upward momentum.