RBC BlueBay AM: Market enthusiasm for rate cuts overblown

RBC BlueBay AM: Market enthusiasm for rate cuts overblown

8 december 2023

Economie algemeen
Outlook vooruitzicht (06)

Fed’s rate hike will be removed, but trajectory will remain same. Decline in European inflation isn’t remarkable. Japanese economy is relatively healthy.

‘We think that market enthusiasm for rate cuts has become overblown. Financial conditions have eased materially and unless there is notably softer data in payrolls and next week’s US CPI, we think that the upcoming Fed meeting won’t see much of a revision in tone from the FOMC,’ says Mark Dowding, CIO at RBC BlueBay AM, today. ‘Although the 2023 rate hike will now be removed, we think that the trajectory will remain otherwise the same.’

Elsewhere, ‘we continue to believe that Japanese economic activity is relatively healthy, and this should be confirmed in a relatively upbeat Tankan survey next week. Inflation remains well above the 2% BoJ target and although we expect data to dip in the fourth quarter this year, we feel confident that there will be a broadening of price increases in the new year, which should add further impetus to prices.’

In Europe, ‘the recent decline in inflation is much less remarkable than may appear to be the case. Base effects have pulled CPI lower, but we are now likely to see this head back up again over the next few months, as these factors drop out of calculations.’

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