Interest Rates Outlook

Structural factors continue to exert more upward pressure on inflation compared to the years before the corona crisis. This complicates the work of central banks. Can they lower interest rates substantially in this climate?

The increasing upward pressure on inflation pushes the expectation of interest rate cuts by the Fed further and further back, reinforcing the upward pressure on long-term interest rates. The further long-term interest rates rise, the tighter financial conditions become and the greater the risk of a risk-off phase that could eventually lead to a sharp decline in interest rates.
 

Rising oil prices, an improving outlook for the goods producing sector and speculation of a higher inflation target for the Fed increase the short-term upside potential for long-term interest rates, but do not change our expectation of falling long-term rates later this year....