Institution: The market may be pricing the interest rate hike paths of the Federal Reserve and the European Central Bank too aggressively

Indosuez Wealth Management believes that the market's current pricing of the Federal Reserve and European Central Bank's interest rate paths is still significantly more hawkish than the institution's baseline scenario. The institution's strategists Lucas Merrick and portfolio manager Alexander Bell expect that economic growth will remain stable, and inflation will gradually normalize, which will limit the central banks' room for further tightening of monetary policy.

The two stated, "However, it may take some time to accumulate enough moderate core inflation and economic growth data to make this scenario a reality. In the meantime, the bond market will remain volatile." The money market currently expects that the Federal Reserve will raise interest rates by about 1.5 times in the next 12 months, while the European Central Bank will raise rates twice.