After a relatively calm week on the macroeconomic data front, central banks will return to the game this week starting this Thursday. The ECB is, in fact, holding its first meeting of the year and will be followed by the Fed next week. If investors' forecasts regarding rate cuts are still out of step with the expectations of central banks (see our last meeting on Monday), the various exits of central bankers, on both sides of the Atlantique, have tended to slightly dampen the enthusiasm of the most optimistic investors, which partly explains the increase in interest rates since the start of the year. As we have already had the opportunity to express in particular in our weekly publications, without calling into question the disinflation and the rate cuts which will occur, all things being equal, from this year, in the case of a scenario of soft landing, monetary easing from March nevertheless seems exaggerated.
In the United States, the market seems to have reviewed the Fed's first key rate cut from March to May. It must be said that before their pre-meeting blackout period, the members of the FOMC wanted to send a message. Thus followed the declarations of (i) Mary Daly, President of the San Francisco Fed, for whom “inflation has not returned to 2%” and for whom it is therefore “really premature to think” of a imminent rate cut, (ii) Austan Goolsbee, President of the Chicago Fed and considered dovish, who believes he needs more data confirming the fall in inflation, particularly in housing to lower rates and, finally, (iii) Christopher Waller, member of the Board of Governors of the Fed, who, while admitting to considering rate cuts this year (which no one doubts), recalled that "with economic activity and a labor market in good health, and with inflation gradually falling to 2%, he saw no reason to act as quickly or to reduce rates as quickly as in the past.
In Europe, the message is essentially the same. Thus, if François Villeroy de Galhau, the governor of the Banque de France, confirmed that “barring any surprises” the next action of the ECB “will be a cut” in rates this year, he nevertheless made a point of recalling that the central bank must be patient and do not act in haste. Reputed to be rather neutral, like Christine Lagarde, it was joined by more hawkish members like Tuomas Valimaki, member of the board of governors. For this one, “it is better to wait a little longer rather than lowering rates prematurely and then having to reverse course.” It should be noted, however, that unlike the United States, the euro zone is rather in the trough of the wave and that GDP there is likely to start to rise again in the quarters to come.
We will nevertheless note that all current discussions on central bank rate cuts only relate to the American soft landing scenario. We therefore keep this point in mind because, in the event of negative surprises on American growth, rate cuts would no longer take place in the same context, with different consequences for risky assets.