This week the PPI (Producer Price Index) and the CPI (Consumer Price Index) numbers were released for April. These are two main inflation gauges, one at the wholesale level and the other for us consumers. Both were significantly lower than expectations. Even the ‘core’ CPI number was below expectation and lower than the month’s before number. The core number strips out food and energy costs. The EU also reported very little inflation this week.
Without inflation the FED has no reason to increase interest rates and maybe that is why they left them alone after their meeting last week though they have not said that and in fact have indicated a desire to keep the pressure on by moving rates higher this year. The ECB (European Central Bank) left their rate alone this week citing a lack of inflation as the reason.
This is good news for both economies and of course for corporations as they enjoy healthy demand. Consumers have money in their pocket and they are spending it.