Halloween ‘ghosts’ of Fed tapering, the Evergrande crisis, and the earnings season did not scare the markets. The Fed telegraphed its message well: while keeping the option to adjust tapering depending on the state of the economy, it reiterated the “transitory” inflation narrative.
The BoE proved more dovish than expected, actually keeping rates unchanged (‘benign neglect’) regarding inflation risk. As a result, nominal yields declined and real yields fell to near new record lows. Although CBs are sticking to their temporary wording, our view, in contrast, is that the latest CPI readings support the “sticky” narrative.
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