A supply deficit supports oil prices. India’s central bank raised interest rates again

The US is currently facing an “unacceptable level of inflation,” Treasury Secretary Janet Yellen said at Tuesday’s Senate Finance Committee hearing. At the hearing, Yellen praised the state of the economic recovery, which she said has been marked by strong economic growth and historically low unemployment, but added that challenges remain. The US economy faces macroeconomic challenges, Yellen said, including unacceptable levels of inflation, as well as headwinds from the impact of the pandemic on supply chains and the effects of supply-side disruptions in oil and food markets resulting from Russia’s aggression in Ukraine.

The US Securities and Exchange Commission (SEC) is preparing to propose big changes to the stock market. One of the SEC’s proposals is to require brokerage firms to send most of the orders of individual investors to auctions, where trading firms would compete to execute them. This would affect how trades are executed after an investor places a market order with a broker to buy or sell a stock.

On Tuesday, the World Bank cut its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia’s invasion of Ukraine has compounded the damage from the COVID-19 pandemic and many countries will face recession.

Bank of America strategists predict that the ECB will raise rates by 0.5% in July and September and then by 0.25% at its last two policy meetings this year. If the ECB raises rates, Japan and China will remain the only countries among peers with soft monetary policy.

The Turkish lira fell by 0.4% against the dollar on Tuesday as fears of runaway inflation were driven by President Tayyip Erdogan’s pledge to continue cutting interest rates.

Oil prices hit a nearly three-month high on Tuesday as supply shortages in the global market persisted. China’s lifting of Covid restrictions, strong job growth in the US, and increased Saudi Arabia’s selling price of oil also provided a solid base to keep oil prices above $115 a barrel.

Asian markets traded without a single dynamic yesterday. Japan’s Nikkei 225 (JP225) added 0.10%, Hong Kong’s Hang Seng (HK50) decreased by 0.56%, and Australia’s S&P/ASX 200 (AU200) closed down by 1.53%.

Japan’s economy shrank by 0.5% in annual terms in the first quarter, revised government data showed Wednesday, but it’s an improvement from the original estimate of a 1% contraction.

India’s central bank (RBI) raised its interest rate from 4.40% to 4.90%. Given that inflation in India accelerated more sharply than expected to 7.8% in April, analysts are confident that the RBI will continue to tighten monetary policy further.