09.06.20261 min
Central banks: narratives vs. fundamentals
Since the onset of the Iran conflict, financial markets have adhered to a hawkish narrative. The global energy shock stemming from the prolonged closure of the Strait of Hormuz has lasted longer than most analysts anticipated, resulting in a sharp rise in short-term inflation expectations—particularly in Asia and Europe, where energy autonomy is considerably weaker than in the US. Yet, from a fundamental perspective, we remain in a disinflationary environment. This is underpinned by the medium-term impact of AI-driven productivity gains in the US and ongoing economic weakness in Europe.
Consequently, any hawkish rhetoric from the Federal Reserve (Fed) or “insurance” rate hikes by the European Central Bank (ECB) are likely to be temporary at best. In Japan, while reflation has potential, significant tightening measures may be postponed to avoid undermining the positive effects of fiscal expansionary policy.
In this context—where ECB and Fed actions are judged as temporary—market concerns about persistent inflation should gradually diminish, and the recent spikes in yield is an opportunity for investors to lock-in attractive yields for medium-term maturities up to 5 years.
