Summary
- The latest CPI data for May was lower than the April number and was also below market expectations.
- A sustainable decline in inflation is likely to encourage the Fed to cut policy rates, although the bank would remain vigilant.
- Fixed income assets may benefit from this progressively slowing inflation.
Actionable Ideas
- US bonds
In an environment of risks around economic growth, and falling inflation, US government bonds may offer good value. We also believe, high quality corporate credit is attractive.
- Global bonds
Expectations of interest rate cuts in countries such as the UK, and robust economic growth in emerging markets, call for a global approach to bonds. This could be complemented by quality credit.
Key Dates
18 June Euro Area CPI, US retail sales |
19 June UK CPI, South Africa CPI |
20 June China 5 year loan prime rate |