The US Senate passed a roughly USD 1 trillion bipartisan infrastructure package, including about USD 550 billion in new spending. This is aimed at rebuilding traditional transportation infrastructure, improve access to broadband internet in rural areas and upgrade the electric grid and water systems. The Senate Democrats also approved a USD 3.5 trillion budget resolution.
China released a five-year blueprint calling for increased regulation affecting key parts of the economy. The document signalled Beijing’s intention to draft new laws covering national security, technology, monopolies and education. In the technology sector, new legislation will cover areas such as online finance, artificial intelligence, big data and cloud computing.
The European Central Bank (ECB) revised its forward guidance, indicating it would keep interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term.” The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.
Consumer prices in America rose 5.4%, well above expectations. There are a small number of huge price rises, such as used cars, whereas the median price change is far lower.
In the UK CPI rose 2.5%. The Office for National Statistics cited increased prices for food, fuel, second-hand cars, clothing and footwear as key factors.
Last month America’s consumer prices inflation rate rose to 4.2% from 2.6% and this is before the full effects of the Biden stimulus plans take affect. Eurozone inflation accelerated to 1.6% year-on-year in April, up from 1.3% in March, following a sharp rise in the cost of energy compared to the height of the pandemic. UK annual inflation meanwhile more than doubled in April to 1.5% from 0.7% in March, although both remain below central bank target rates of 2% for now.
The Senate finally passed a budget resolution moving forward legislation authorising the $1.9 trillion stimulus the President requested. This takes the amount of the global stimulus to above $22 trillion.
Saudi Arabia shocked the markets by raising pricing for oil customers after cutting supply by 1 million barrels a day in February and March.
Japan announced a new ¥73.6tn ($708bn) stimulus package to further support the recovery. The new stimulus package will include subsidies for green investment and spending to accelerate digitalisation.
The European Central Bank (ECB) has bolstered its pandemic emergency purchase programme (PEPP) by €500bn – taking it to €1.85tn. It also announced it was extending the PEPP by nine months, until at least March 2022.
The US Federal Reserve (Fed) announced a new policy of a flexible average inflation target, meaning it will allow inflation to run “moderately” above the 2% target after periods when it has been persistently below-target. This would potentially allow the bank to keep US interest rates low for longer.