Director of Research , Macroeconomics and Strategy
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The key issue for the economy, policy and asset allocation is the scale of the decline in core inflation and when inflation targets will be sustainably achieved.In turn this determines when central bank policy rates will peak in the DM space and the timing and magnitude of easing in 2024 and beyond.This has been complicated by March’s banking sector turbulence in the U.S. and Switzerland.On balance, we do not see a systemic banking crisis (here), but rather an enhanced credit squeeze that hurts activity and ends DM tightening before some central banks desire.In contrast, it is less important whether the U.S. and EZ economies have a modest/small recession or a phase of stagnant growth, though this would have tactical impact on policy and markets.
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