“Markets expect Central Banks to cut rates in early 2024. This is too optimistic, but falling inflation is good news for investors.”
- Inflation has fallen faster than expected in both the USA and Euro area, pushing the market to believe Central Banks are at a turning point.
- The Fed was clearly dovish, judging from its statement, revised projections and press conference.
- The ECB committee was more prudent, yet still paving the way for rate cuts in 2024.
The rapid fall in inflation since this summer has largely erased the prospect of further rate hikes in the US and Euro area. During the latest press conference, Fed chairman J. Powell acknowledged that the committee has started discussing the pace of future rate cuts. 75bps of cumulated cuts by the end of 2024, but the market expects more.
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