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Recession – but no central bank rescue Thumbnail

Recession – but no central bank rescue


Thoughtful commentary from our partners at BlackRock:

No ignoring trade-off

Central banks confront the growth-inflation trade-off, with the Federal Reserve seeing recession but no rate cuts. We agree – and prefer inflation-linked bonds.

Market backdrop

Bank stocks remained under pressure last week. The two-year U.S. Treasury yield slid further as the market priced in a series of Fed rate cuts.

Week ahead

We’re watching inflation data on both sides of the Atlantic this week for further signs of it staying elevated, while monitoring the ongoing banking sector woes.

The central bank trade-off between crushing activity or living with inflation is now impossible to ignore as economic damage and financial cracks emerge. That was evident in the Federal Reserve’s forecast of recession this year and sticky inflation in years to come. Central banks have clearly separated responses to the banking tumult and kept hiking rates. We see a new, more nuanced phase of curbing inflation ahead: less fighting but still no rate cuts. We favor inflation-linked bonds.

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This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of March, 27, 2023 and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks.