The solar eclipse isn’t the only thing that cast a shadow on the United States this week.

A higher-than-expected inflation figure, the third in a row, is pointing to a worrying trend: the downward trajectory of inflation is stalling. The implications are clear: the Federal Reserve is likely to postpone any potential rate cuts until after the summer, and when implemented, they may be more conservative in scale.

This will have global effects: to protect their currencies, central banks around the world are unlikely to lower rates much more than the Fed. In turn, this could derail much-needed recoveries in markets and industries sensitive to interest rates, and continue to place undue pressure on labor markets and overall economic activity.

Much like the eclipse, let’s hope this temporary rebound in US inflation is fleeting.

Senior Analyst, Global Economics

High oil prices are back on the menu. 

In the last two months, the price of the Brent crude oil benchmark has increased by 17%, buoyed by an increase in geopolitical risk in the Middle East and Ukraine, as well as strengthening macroeconomic fundamentals in some of the world’s major economies.

So far, there is no indication that this could delay rate cuts: central bankers are more concerned with other inflationary factors, such as services. But further increases in oil prices for a sustained period of time could undo some of the disinflationary trends in categories such as durable goods and transportation and, in doing so, stall the progress toward central banks’ inflation targets. We’re not out of the woods just yet.

Senior Analyst, Global Economics

This week, one of the world’s most captivating economic experiments came to an end: for the first time in 17 years, the  Bank of Japan increased its interest rate  to above 0%, marking the death knell for the era of ultra-low and negative interest rates that had defined the global economy before the onset of the pandemic.

From a shorter-term perspective, the Bank of Japan’s decision is made all the more interesting by the fact that it is completely out of step with the rest of the world:  most central banks are looking to lower  their interest rates , not raise them – some, such as in  Switzerland and Latin America, have already started the process.

This trend will continue in 2024: with the global drivers of inflation, notably Covid-related dislocations and commodity price shocks, having now subsided, domestic dynamics will increasingly steer the course of monetary policy. Time to look closer to home.

Senior Analyst, Global Economics

The outcome of this week’s major political event was known months, if not years ago. 

Vladimir Putin secured a fifth term as president of Russia, winning around 87% of the vote, in what was widely condemned as a fraudulent election—he is set to remain in power until at least 2030. 

Putin is likely to use the election landslide as a mandate to double down on Russia’s war effort. However, we do not expect this to fundamentally alter the dynamics of the war in Ukraine; US funding to Ukraine will be the deciding factor here. Over the longer term, however, Russia’s ability to fund its war effort is in question, given the depletion of vital resources and increasingly stringent sanctions.

While Putin’s re-election was all but guaranteed, the outcome of the war in Ukraine remains far from certain. This has critical implications for Europe’s military and economic security, as well as for the wider global geopolitical landscape.

Senior Analyst, Global Economics