Market Pricing of Fed and ECB Rate Hikes is Too Aggressive

Indosuez Wealth Management believes that the market pricing of the Federal Reserve and European Central Bank's interest rate paths is significantly more hawkish than the institution's baseline scenario. Strategists Lucas Meric and portfolio manager Alexandre Bell expect economic growth to remain stable and inflation to gradually normalize, which will limit the central banks' room for further tightening of monetary policy. They stated that it may take some time to accumulate sufficient moderate core inflation and economic growth data to achieve this scenario. In the meantime, the bond market will remain volatile. The money market anticipates that the Federal Reserve will raise interest rates by about 1.5 times over the next 12 months, while the European Central Bank will raise rates twice.

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