Eurozone Inflation Surges, ECB Signals Likely Rate Hikes in June and Beyond

Bank of England Governor Bailey sent a clearly dovish signal. He noted that given the current economic weakness, the central bank could tolerate inflation exceeding the 2% target for a period of time. This remark significantly lowered market expectations for a rate hike in June. However, Bailey also warned that once signs of second-round effects emerged, the central bank's tolerance for inflation would diminish accordingly.

US Fed Vice Chair Bowman noted that it was still too early to judge the impact of the Middle East conflict on US inflation, and that temporary price shocks should be overlooked. However, Kansas City Fed President Schmid argued that it was difficult to continue viewing the current energy price shock as a "transitory" factor, and that officials needed to clearly express their willingness to take necessary measures to maintain price stability. The Fed's Kashkari stated that it was too early to determine whether rate hikes were needed, and that all possible policy options should be kept open. Fed official Paulsen said there had been no structural change in inflation.

US President Trump once again emphasized his stance on Iran and stated that he would "make a final decision." He made it clear that Iran must commit to never developing nuclear weapons, while demanding that the Strait of Hormuz immediately achieve two-way free passage without charging any transit fees. In addition, he mentioned that the US Navy's blockade of the Strait of Hormuz is about to be lifted, and Iran's enriched uranium materials will be dug up and destroyed.Trump also revealed that the US and Iranian sides had reached agreement on other secondary matters beyond the key issues of Iran's nuclear program and passage through the Strait of Hormuz.