The Weekly Strategy Report (April 15, 2019)
- The Federal Reserve (Fed) tilt toward dovishness this year has echoed through the policy stances of other major central banks.
- For the European Central Bank and Bank of Japan, increased dovishness primarily appears in the form of extended forward guidance, while other DM central banks have more room to act if desired.
- In emerging markets, central banks’ earlier tightening cycle is giving way to rate cuts, albeit modestly so.
- We expect the Fed to stay on hold through this year; although we see two-sided risk to that outlook, we think inertia will prevail.
- Central bank dovishness leaves us neutral on duration, despite the rally in government bond yields; otherwise, we see a fairly benign, if unspectacular, environment for risky assets that is supportive of credit in particular, with likely downward pressure on the U.S. dollar.
EXHIBIT 1: U.S. CORE CONSUMER PRICES AND FINANCIAL CONDITIONS
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