Wrongfooted investors and analysts have been forced to tear up their optimistic predictions of sweeping interest rate cuts this year as rising oil and metals prices add to inflationary pressures, reigniting fears that borrowing costs will have to stay ‘higher for longer’.
In a dramatic shift in sentiment, markets are now betting that the Federal Reserve will deliver only one or two quarter point interest rate cuts this year.
That compares with the six or more cuts expected back in January and the three that the more conservative Federal Reserve had projected. But after US inflation this week beat forecasts for the third month in a row, traders and fund managers are being forced to look hard at their assumptions.
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