Our latest views on the major central banks
At a Glance
Per the full note , ING expects the Fed to skip a hike and cut in mid-to-late 2027, forecasting a neutral rate of 3.25%. The ECB's June hike is questioned given falling oil prices. The market may be overpricing Fed tightening, creating a dovish skew for USD.
Key Takeaways
- 01ING sees no Fed hike this year despite hawkish dots, citing disinflationary trends.
- 02Fed cuts are expected only in mid-to-late 2027, with a terminal neutral rate of 3.25%.
- 03ECB's June hike is viewed as potentially premature given falling oil prices.
- 04Market pricing of Fed tightening may be excessive, favoring USD downside over time.
Full Analysis
What the desk is arguing
Per the full note , ING argues the Fed will maintain a lengthy pause despite the hawkish June FOMC projection of one hike this year. The desk emphasizes that nine members did not support a hike and cites falling oil prices, slowing shelter inflation (35% CPI weight), and a lackluster jobs market as disinflationary forces that will prevent further tightening.
Supporting evidence includes a sharp decline in oil prices from peaks, stagnant home prices, and outright rent falls in some areas. Tariff refunds from 'Liberation Day' IEEPA duties will further reduce corporate costs. The desk expects the first cut in mid-to-late 2027, bringing rates to a neutral 3.25%.
For the ECB, the desk questions the necessity of the June hike given the drop in oil prices, suggesting a potential pause ahead. The Bank of England is also discussed, though details are truncated in the excerpt.
Market Implications
The dovish Fed call relative to market pricing suggests USD downside potential. Focus on EUR/USD for ECB-Fed policy divergence and USD/JPY for rate spread dynamics. A break below 1.0650 in EUR/USD would challenge this view.
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Articles Our latest views on the major central banks Published 11:09 United Kingdom Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Our take on what could be next for the Federal Reserve, the European Central Bank and the Bank of England over the comi
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