The Fed now anticipates a recession

This is rare enough to be noted. In its minutes, the Fed clearly contemplated that given the recent developments in the banking sector, its projections for the March meeting were for a mild recession starting at the end of the year.

Depending on whether you see the glass as half empty or half full, the US inflation figures will be interpreted differently: CPI came out slightly below expectations with a 5.0% and 0.1% increase in annual and monthly rates respectively, compared to +5.2% and +0.2% expected. However, excluding energy and food, the Core CPI rose by +5.6%, exceeding the CPI for the first time in two years. In other words, the efforts of the U.S. central bank have not yet had their full effect. In fact, 88% of investors expect a 25 basis point rate hike at the next policy meeting scheduled for May 3, followed by a final hike in June before starting to cut rates this summer.

Copyright: Bloomberg

The ECB's expected path is significantly different: the European central bank is expected to continue its tightening cycle marked by multiple rate hikes until September/October before initiating further easing there too from the end of the year.

Copyright: Bloomberg

In fact, the spread between the US 10-year and the European 10-year continues to narrow and is now only a short distance away from the target posted last December in our special article on this spread.