Moneycontrol Pro Panorama | Cooling US inflation good news for emerging markets 

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Global equity indices literally came back to life as Wednesday’s announcement of cooling US inflation brought relief to markets. The sigh of relief was palpable, given that the below-than-expected 0.3 per cent rise in April’s consumer price index (CPI) revives hopes of rate cuts by the Federal Reserve in 2024. Stubborn and elevated inflation over the past six months had until recently stoked concerns of rate hikes, instead of cuts.

To be sure, it would be investors’ and policymakers’ hope that this is not a one-off reading, but the beginning of the inflation curve trending lower. Some economists are not convinced yet. Bond yields and equities are showing relief. “There were no big positive surprises that would upend the market’s forecasts for interest rates,” says Financial Times’ Robert Armstrong in this article (free to read for MC Pro subscribers). One key reason stated for continued concern about rate cut expectations is that the improvement was more in the price of goods and not so much in services.

In any case, bond yields fell and Wall Street’s benchmark indices rallied strong. Hope and optimism that the US Fed finally has a chance to consider rate cuts sooner than later, saw Asian markets open higher today. European equities too, are likely to toe the line of their peers.