Expectations of lower interest rates have propelled stock markets around the world to record highs.

 

Stock markets on a high. Global share prices surged to new highs in March, driven by
expectations that interest rates reductions are on the way. The US Federal Reserve held rates
between 5.25% and 5.5% and upheld its projection for three cuts this year. Similarly, the Bank of
England held rates steady and is optimistic about the economy’s trajectory for cuts.

Inflation continues to fade. Driven by lower food prices, UK inflation dipped to 3.4% in February,
raising expectations for a Bank of England rate cut in the summer. US inflation increased slightly
to 3.2% in February, challenging the Fed’s lower rates outlook, although the economy added 275,000
jobs. Euro area inflation eased to 2.6%, just above the ECB’s target.

Better news for China. With industrial output climbing 7% year-on-year and retail sales up by 5.5%,
China’s economy is showing signs of recovery. However, the property market continues to face
challenges, and although consumer prices have increased for the first time in six months, it’s
premature to determine if deflationary pressures have abated.