Is interest rate pessimism overdone?

Is interest rate pessimism overdone?

Key Takeaways

  • Markets have revised expectations for interest rate cuts downwards in recent months.
  • Recent US data suggests that inflation is no longer falling – we think that the weightings of rents in inflation indices are skewing the numbers.
  • US wage inflation is falling, and we think that might allow the Federal Reserve to move quicker than markets now expect.
  • Europe’s central bankers have signalled a 0.25% in June and we think that will go ahead.
  • The outlook is cloudier in the UK, but wage inflation is easing and there is growing consensus that inflation is about to hit the 2% target.
Transcript
Steven Bell
Chief Economist, EMEA
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