🎯 Top Story

💵 Treasury Secretary Bessent expects one to two months of hot inflation data

What happened: US Treasury Secretary Bessent said there could be one to two months of "hot" inflation data in the near future. After that, he expects inflation to come back down.

Why it matters: The administration is preparing markets for higher near-term inflation readings. But it is also signaling confidence that the trend will reverse.

Market impact: Neutral in the near term. The dollar may trade off each data release.

🔥 Quick Takes

💵 Dollar

• Treasury Secretary Bessent: One to two months of hot inflation ahead, then a decline → Preparing markets for higher near-term data.
• Fed's Schmid: Inflation remains the biggest risk, but the US economy is showing resilience → Hawkish lean, but not rigid.
• Fed's Williams: No significant second-round inflation effects seen yet. No reason to hike or cut rates → Neutral.
• Fed's Barr: The balance sheet runoff target is a mistake → Suggests policy may adjust.
• April retail sales: 0.5 percent, lowest since January, in line with forecasts → Economy cooling slightly.

💷 Pound

• BOE's Pill: Moderate rate hikes are beneficial → Supports rate hike expectations.
• UK March GDP: Grew 0.3 percent, stronger than expected → Economy is solid, but politics and war are risks.

💴 Yen

• Reuters poll: 65 percent of economists expect the BOJ to raise rates to 1.00 percent in June → Supports the yen.
• BOJ: From food to hot springs, prices are expected to rise around summer → Inflation is broadening.

🌍 Other

• India: Considering tax cuts for foreign bond investors → Aiming to attract capital inflows.
• Reuters survey: Bearish views on rupiah and rupee have increased; short positions on most other Asian currencies have decreased → Diverging regional trends.
• Goldman Sachs: Now expects South Africa to hike twice this year, a sharp reversal from its previous easing forecast → Major policy shift.
• Turkey central bank: 2026 medium-term inflation target raised to 24 percent from 16 percent; 2027 target raised to 15 percent from 9 percent → A sharp upward revision.
• Peru central bank: Held rates at 4.25 percent → Neutral.
• PBOC: April M2 rose 8.6 percent year-on-year to 353.04 trillion yuan → Still in easing mode.
• Malaysia central bank: Price pressures remain contained. Ringgit is resilient despite Middle East conflict → Relatively positive.
• South Korea: April foreign equity outflows at 2.68billion,downsharplyfrom
• 2.68billion,downsharplyfrom29.78 billion in March → Selling pressure has eased significantly.

📊 Key Data Snapshot

💡 Final Take

• Three themes stand out today: Bessent bracing markets for hot inflation, BOE and BOJ leaning toward rate hikes, and diverging global rate expectations.
• 💵 Dollar: Bessent warns of 1-2 months of hot inflation ahead. Schmid says inflation is the biggest risk. Williams sees no reason to hike or cut. Retail sales hit a January low.
• 💷 Pound: Pill supports moderate rate hikes. March GDP grew 0.3 percent, stronger than expected. The economy is solid, but politics remain a risk.
• 💴 Yen: 65 percent of economists expect a BOJ rate hike to 1.00 percent in June. The BOJ warns prices are rising across the board.
• 🌍 Others: Goldman now expects South Africa to hike twice this year. Turkey sharply raised its inflation targets. Malaysia and Peru held steady. Korea's foreign outflows have slowed sharply.

Final takeaway: US inflation may run hot over the next two months. The BOE and BOJ both have reasons to hike. Global policy expectations continue to diverge.

🔮 Looking Ahead

• 📈 US inflation data in coming months
• 🇯🇵 Will the BOJ hike in June?
• 🇬🇧 UK political situation after local elections
• 🌏 Next moves from Asian central banks