We continue to expect the US Federal Reserve (Fed) to increase rates a further two times this year. Based on the hawkish tone of the minutes from the March meeting, we also think balance sheet reduction could start toward year-end.
European rates rallied over the last week following weaker-than-expected inflation data and comments from European Central Bank (ECB) officials suggesting a prolonged commitment to accomodative monetary policy.
UK Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty through written notification to the European Council of the UK's intention to withdraw from the European Union. Price movements in UK assets have been relatively sanguine, but will likely face headwinds throughout the uncertain two-year negotiation process.
The US core consumer price index (CPI) declined for the first time since 2010. We view the March softness, which was largely driven by communications, as temporary and continue to expect two further rate hikes by the Federal Reserve (Fed) this year.
The US Federal Reserve (Fed) raised interest rates by 25bps in its March meeting, raising the target range for the federal funds rate to 0.75-1.00%, while maintaining projections for a total of three rate hikes this year.