Trump Extended the Ceasefire. Markets Surged. The Inflation Didn’t Stop.
Market Snapshot
The Signal
Trump extended the US-Iran ceasefire indefinitely on Tuesday, just hours before it was set to expire. Markets responded immediately. The Nasdaq jumped 1.67%, the S&P 500 gained over 1%, and even gold climbed as investors exhaled. But the ceasefire extension is not the same as peace. The second round of talks scheduled for Pakistan this week was put on hold. Neither side has agreed to anything beyond not shooting. And while the guns are paused, the economic damage from two months of war is now showing up in price data worldwide. The UK reported March inflation of 3.3% on Wednesday, identical to the US figure, driven by fuel prices seeing their largest increase in over three years. The war stopped. The inflation did not.
“The extended ceasefire won’t prevent a painful period of accelerating inflation. Energy costs and food prices are likely to lift UK headline inflation above 4% by autumn.” (Suren Thiru, ICAEW chief economist)
What To Watch
- →Bank of England rate decision on April 30. With UK inflation at 3.3% and potentially heading above 4%, the BOE faces the same trap as the Fed. Raising rates risks stagflation. Holding risks entrenching inflation. Economists currently expect a hold.
- →Whether Pakistan ceasefire talks resume. The indefinite extension keeps markets calm, but a collapsed second round of talks would send oil back toward $110 within hours.
- →Kevin Warsh’s confirmation vote. Trump’s Fed Chair pick argued for a smaller Fed balance sheet this week and pledged to fight inflation despite Trump’s public demand for rate cuts. If confirmed, the next Fed Chair is already on a collision course with the White House.
