US inflation remains at a four-decade high: inflationary pressures moderated slightly in the US during April: the rate of consumer price inflation eased from 8.5% year on year in March to 8.3% as petrol price rises eased. Nevertheless, it remained at a four-decade high, underpinned by rising prices for housing, food and travel. The Dow Jones Industrial Average Index ended May largely unchanged, while the yield on the US 10-year Treasury bond rose above 3% for the first time in over three years during the month.

 

Inflation grips Europe: Europe’s annualised rate of inflation surged from 7.4% in April to a fresh all-time high of 8.1% during May, driven up by energy prices. Some countries in the euro area – including Estonia, Lithuania, Latvia and Greece – are experiencing double-digit annual inflation rates, whereas inflationary pressures in countries such as Malta and France are comparatively muted at 5.6% and 5.8% respectively. The European Central Bank (ECB), however, believes that inflation in the eurozone is set to be “on target over the medium term”. The Dax Index  rose by 2.1% during May.

 

ECB tightening in sight: amid heightened expectations of monetary tightening in Europe, the yield on Germany’s benchmark government bond breached 1% during May. ECB President Christine Lagarde commented: “We are likely to be in a position to exit negative interest rates by the end of the third quarter”. 

 

Rates rising in Asia: the Reserve Bank of India increased its benchmark rate by 40 basis points to 4.4% in a bid to curb inflationary pressures, and the Reserve Bank of Australia raised its key interest rate by 25 basis points to 0.35% during the month – its first rate increase in over a decade. Elsewhere, Japan’s economy contracted by 1% year on year during the first three months of 2022. The Nikkei 225 Index climbed by 1.6% over May.