THE MARKETS

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Uncertainty surrounding the inflation outlook is prompting the major central banks of advanced economies to adopt a cautious approach. As widely expected, the ECB cut rates at the beginning of June, despite raising its inflation forecasts, but gave no indication of the next steps. The Fed was also very cautious, reducing the expected cuts in the projections of FOMC members from three to only one by the end of the year, despite the significant surprise downward inflation trend in May. Our scenario has not changed: we expect a Fed cut in September, followed by another in December, while in the ECB case we expect two more cuts following the one decided in June (again in the September and December meetings). Finally, the return of political risk in Europe should be noted with the early elections in France being called by surprise by President Macron after the voting results for the European Parliament.

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