Eurozone officials have discussed raising interest rates as the world economy becomes increasingly handcuffed to the conflict in and around the Persian Gulf.

After the decision, Reuters quoted ECB sources as saying a June hike was “very likely”.

Amid all the talk of economic difficulties brought on by rising energy prices from the war – Brent crude pushed above USD 120/bbl again Thursday morning – European Central Bank President Christine Lagarde indicated that the bank has struck a course. “Directionally, I know where we are heading,” she said, painting an even more hawkish picture for observers. Nordea called the statement “another hint of taking a step towards a rate hike.”

Economists were already predicting a 25-basis point increase in June even before this week’s ECB decision, and that policy change now seems like a largely done deal barring an abrupt end to the conflict. (LiveSquawk – Continue Reading)

One month ago, Bank of England Governor Andrew Bailey told us markets were getting ahead of themselves on rate hike pricing. That feels like the underlying message from the April decision, which keeps interest rates at 3.75%. But it’s also clear the Bank is inching closer to a rate hike in June. That’s narrowly now our base case.

Like everyone else, the Bank is dealing with the uncertainty through scenarios. Its middle scenario B is largely premised on current market pricing. Oil quickly eases back below 100 USD/bbl, and natural gas stays roughly where we are now through most of this year before moving gradually lower. Crucially, that scenario generates virtually no second round effects on inflation, the Bank thinks; the impact on wage growth is marginal. (ING – Continue Reading)

U.S. economic growth picked up in the first quarter as businesses invested heavily in artificial intelligence, rebounding from a fourth quarter dented by a government shutdown.

At the same time, the economy didn’t expand as fast as economists expected, weighed down by softer consumer spending growth. (WSJ – Continue Reading)

Gary Marcus think Big Tech firms are dumping way too much money into AI.

The researcher and author took Wednesday's earnings bonanza as an opportunity to criticize hyperscalers' capex spending plans, taking aim at Alphabet, Amazon, Meta Platforms and Microsoft, all of which are spending massively to further their AI ambitions.

"Greatest capital misallocation in history" he wrote in a Thursday post on X, describing the company's AI capex plans.

Marcus highlighted the four companies' history of AI spending, highlighting the trend of the four top hyperscalers setting records with each earnings report since 2022. Wall Street, in turn, has mostly continued to reward these companies, though some signs of fatigue have begun to show in recent quarters. (Business Insider – Continue Reading)