New Fed Era & a Historic Debut

This week, macro investors are hoping the number sheds its unlucky reputation as Kevin Warsh officially takes the center seat as the 17th Chair of the Federal Reserve. He steps into an undeniably murky environment. The Fed is widely expected to keep rates unchanged, as inflation remains above target (after last week’s CPI and PPI reports) and energy prices remain elevated amid the ongoing conflict in Iran.

Against that backdrop, the ECB raised interest rates last week for the first time since 2023. The Bank of Japan is expected to do the same at its meeting this week, as those regions continue to feel the impact of a closed Strait of Hormuz given their dependence on imported oil from the Middle East.

Despite the inflationary backdrop, markets continue to grind higher, led by technology on the back of continued AI investment. Inflows since the March 30th lows have been dominated almost exclusively by technology (see the chart of the week below).

Amidst the technology focus, SpaceX’s historic IPO (ticker SPCX) began trading at $135 per share after strong demand and reported oversubscription. Its first-day performance will now be measured against the broader IPO record.

In addition to the Fed’s rate decision this week, markets will get a glimpse at ongoing consumer health with retail sales being released in the U.S. on Wednesday.

What Happened

U.S. Inflation – Headline CPI came in at 4.2% on a year-over-year basis, while Core CPI came in at 2.9% on a year-over-year basis, both in line with estimates (Source: Bloomberg Economic Calendar).

U.S. Producer Prices – Final Demand Producer Prices came in at 6.5% vs. estimates of 6.4% on a year-over-year basis (Source: Bloomberg Economic Calendar).

European Rates – The ECB was the first major central bank to raise rates by 25 basis points, with inflation projections revised higher and two additional hikes forecasted for this year (Source: Reuters).