The US has announced that annual inflation has dropped to 3% year on year.
👉 Background: Governments around the world measure inflation on the goods and services from year to year. It gives them a sense of how much the cost of living is rising in the economy.
👉 What happened: Now, the US has announced that annual inflation has dropped to 3% year on year. And the main drivers of this slowed inflation are the cost of many everyday items:
👉 What else: Other ripples in the market include the two-year bond yields dropping, because traders reckon the US Federal Reserve might not be as gung-ho about raising interest rates this year.
💡Bonds are another form of investment which is pretty much like lending money to a friend... They promise to pay you back your original investment at a certain time, plus interest.
💡But with bonds, you lend money to a company or government rather than a mate. The returns change depending on the riskiness of the borrower and the length of the loan.
💡And since inflation and interest rates are two of the key factors that impact the bonds value, you're bound to see movements in bond yields when large announcements are made.
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