JP Morgan AM: Bond markets are weighing cooling inflation against fiscal risks
JP Morgan AM: Bond markets are weighing cooling inflation against fiscal risks
Underlying inflationary pressures continue to ease across developed markets as core inflation cools. This, combined with softening US growth data, suggests that all things being equal more central banks could start normalising policy this year.
However, bond market volatility is likely to remain high in the coming months as markets also attempt to factor in political change and the risk of further expansionary fiscal policy, particularly in the US. While the current economic set up is constructive for core fixed income, investors should focus on regions where fiscal credibility underpins the medium-term outlook for inflation and interest rates.
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