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Investment Institute
Weekly Market Update

Take Two: Eurozone inflation eases; Fed wants more data before rate decision

  • 08 April 2024 (3 min read)

What do you need to know?

Eurozone inflation eased unexpectedly to 2.4% in March from 2.6% in February, boosting the case for the European Central Bank (ECB) to cut interest rates. Food, energy and industrial goods drove the headline figure down – while core inflation, excluding food, energy, alcohol and tobacco also fell, to 2.9% from 3.1%. In addition, Eurozone business activity returned to growth in March for the first time in 10 months, according to the composite Purchasing Managers’ Index (PMI). It rose to 50.3 from 49.2 in February – a reading above 50 indicates expansion – as stronger services activity offset a contraction in manufacturing.

Around the world

More data is needed before US interest rates can be cut, and it is too soon to tell whether recent higher-than-expected inflation readings represent “more than just a bump”, Federal Reserve (Fed) Chair Jerome Powell said in a speech. Meanwhile US business activity continued to expand in March with the composite PMI at 52.1, marginally down from February’s 52.5. Elsewhere, a Bank of Japan (BoJ) survey showed service sector optimism rose to a 33-year high in the first quarter, helped by increasing tourism and profits from higher prices, adding to speculation the BoJ could raise interest rates again this year.

Figure in focus: 6.0%

South Asia is set to remain the fastest growing regional economy globally for the next two years, driven by India, the World Bank said as it forecast 6.0% growth for the region in 2024 and 6.1% in 2025. The East Asia and Pacific region is also growing faster than the rest of the world, but slower than before the pandemic, the World Bank said. It expects growth there to slow to 4.5% in 2024 from 5.1% last year and said while recovering global trade and easing financial conditions will support the region, “increasing protectionism and policy uncertainty will dampen growth”. 

Words of wisdom

Inflation Reduction Act: Introduced in the US in 2022, the Inflation Reduction Act (IRA) is designed to increase clean energy investment, cut healthcare costs, and raise tax revenues. It is expected to drive growth and innovation, helping the private sector – and investors – decarbonise emission-intensive sectors. The US saw $239bn in new investment in the manufacture and deployment of clean energy, clean vehicles, building electrification and carbon management technology in 2023, up 38% from 2022 according to research firm Clean Investment Monitor. A record $67bn of this came in the fourth quarter of 2023, a 40% increase on the same period in 2022.

What’s coming up?

On Wednesday, the US issues its latest inflation figures while the minutes from the last Fed meeting are published. Wednesday also sees the Bank of Canada convene to set interest rates; the ECB holds its own monetary policy meeting on Thursday when China publishes its inflation data for March. The UK issues its GDP numbers for February on Friday. 


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