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Higher for longer – the IMF has recently introduced its economic forecast that sees rates at a higher level for the next 5 years, albeit predicting a peak in 2024. Particulalry in the UK, subdued growth forecasted in 2024 and beyond, and higher inflation will keep rates higher for longer. Furthermore, interest rates should peak at 6% (5.25% at present), meaning that the Bank of England should hike again from here. A stable, down path has been forecasted for both the US and the Euro Area, and no changes in policy in Japan.

@inflectionpoint This forecast is consistent with rates peaking in late 2023/early 2024 pretty much across the developed world. While this reflects the consensus, we believe there are margins of error to this forecast, namely that rates will peak later and perhaps at a higher level still. Today’s PPI number was the highest in 5 months and well above consensus; we shall see the CPI number tomorrow. Bond yields seem to be declining since Hamas attacked Israel, but the FOMC minutes will be scrutinised closely for possible clues on how high the Fed wants to go (is one more hike enough?). In Asia, Monetary Policy has been stable for a while and the BOJ is keen not to rise rates – but should inflation spike and/or the JPY become too weak, they might be forced to. So let’s wait and see, and watch out for fat tails!

#investing #macro #centralbanks #fed #interestrates #fixedincome #equitiesv #stockmarket #sp500 #volatility

Chart from IMF H/t BBC

Inflection Point Tom Baldacci

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