On the economic data front, U.S. consumer prices took centre stage, and while both headline and core CPI growth accelerated in May, equity markets weren’t exactly fussed by the hotter-than-expected gains, as “transitory” remained the mantra (and thus, less worry that the policy accommodation rug will be pulled abruptly). The Bank of Canada echoed that sentiment at Wednesday’s monetary policy meeting, blaming the current pick-up in core inflation on “temporary factors and base year effects”.
Switching gears to Europe, the ECB also chimed in this week but made no direct policy changes at Thursday’s monetary policy meeting. Still, GDP and inflation forecasts were cranked up a notch for this year and next, though importantly, President Lagarde noted that she saw “no reason to expect rising inflation to last”. In China, producer prices flashed their strongest year-on-year growth in more than a decade (+9.0%y/y in May), highlighting Beijing’s concerns over the latest surge in commodity prices. Still, so far the passthrough to consumer prices has been limited, as CPI growth rose to a moderate 1.3% y/y pace.
|Table 1 - Market Performance|
|Source: BMO Economics, Bloomberg|