The key indices of the US stock market - Dow Jones, NASDAQ, and S&P 500 - ended Thursday with a new strong fall. As we have already said in previous articles, from time to time stock indices are adjusted against the correction. We have seen another round of upward correction in recent weeks, so now is the time for a new fall. The situation in the US stock market and the fundamental background do not change at all. The market still expects a strong rate hike and the start of the QT program, which means the sale of treasury and mortgage bonds from the Fed's accounts. Both the first and second steps are a tightening of monetary policy. Therefore, nothing is surprising in the fact that risky assets are falling in price. The most interesting thing is that the main driver of the increase in the key rate is inflation. After all, it was inflation that rose in the US to 40-year highs, and now it is impossible to conclude that it has at least begun to slow down and the worst is already behind us. By the end of April, the consumer price index decreased by 0.2% in annual terms, but, as we have already said, this may be a coincidence, an accident, or a banal rollback. Yes, there is also the concept of "rollback" in macroeconomic indicators. Thus, for the time being, inflation retains every chance of continuing to accelerate. And whether this is true or not, we will find out today, when the report for May will be published.
"Russia is to blame for everything." It is this opinion that has been voiced more and more often lately by the first economic officials of the United States and the European Union. Recall that price growth (i.e. inflation) largely depends on the prices of hydrocarbons. If the price of oil or gasoline increases, it means that the price increases for almost everything, since gasoline costs are embedded in the production or delivery of any goods. In addition, the military conflict between Ukraine and Russia has led to even greater disruption of logistics chains around the world. And the greatest concern now is the issue of food, since there is no way to export wheat and other crops from the blocked Ukrainian ports, on which the poor countries of the world depend primarily. Naturally, there will be no hunger in the European Union or the United States, there will only be a new increase in prices for scarce food. These are the thoughts voiced by US Treasury Secretary Janet Yellen in her last speech. She called inflation "unacceptable", and dangerous for the economy, and also admitted her own mistake when she spoke about the short duration of high inflation. Yellen also said that it is very important to reduce inflation without creating pressure on the labor market, and noted that the independent Fed is responsible for inflation, which "everything should work out." Well, today we will see whether an increase in the rate to 1% will lead to the completion of the acceleration of this indicator.
