THE MARKETS

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The latest upside surprise in US inflation in March has led to a significant revision in both our and the market's expectations for the Fed's monetary policy. While we have moved the Fed's first rate cut from June to September, the risk that rates will remain unchanged this year and that the Fed may even consider a new round of tightening in late 2024 or 2025 has also increased significantly. On the other hand, expectations of an ECB rate cut in June remain unchanged, as long as inflation continues to fall over the next two months. The ECB's rate-cutting cycle would be more limited than currently expected if inflation dynamics force the Fed to significantly delay the start of rate cuts in the coming months.

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