PARIS (Reuters) – While inflation is on a downward slope, the main uncertainty now concerns growth and the perception of the central banks’ message by the markets, according to Lombard Odier.
Inflation is showing signs of slowing down in the United States, where it should reach 3% at the end of the year according to private banking specialists, and in Europe.
The occurrence or not of a recession is therefore now the main unknown, with the developed economies being subject to contradictory factors which complicate forecasts.
“We estimate that the developed economies will suffer a moderate recession”, explained Samy Chaar, chief economist of Lombard Odier.
The drop in credit production in the United States and in Europe will weigh on activity, while the commodity markets, in sharp decline since last year, send a bad signal on the state of the economy. world.
The economist recognizes, however, that the resistance of the labor markets and the service sector could allow rich countries to avoid a recession.
The decline in inflation and the slowdown in activity are not making the task of central banks any easier, as they will have to temper market expectations once the terminal rate has been reached.
“Central banks will have to maintain restrictive conditions until they start to cut rates, which will not be possible if equities rise and bond yields fall” in anticipation of a cut in the key rate, said noticed Samy Chaar.
Communication would then be the only tool available to central banks, even if balance sheet management can, in part, contribute to maintaining restrictive monetary conditions.
In this scenario, Lombard Odier maintains exposure to quality equities but is neutral on the asset class, which already factors in a lot of good news.
Conversely, the imminent end of the rate hikes will be favorable to bonds, whose prices will rise a little before the last rise, while the dollar should suffer from the tightening of the rate differential between the Fed and the rest of the banks. power stations.
(Report Corentin Chapron, edited by Blandine Hénault)
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