The inflation debate returns

Macroeconomic update for June 2026

Inflation has moved back into the limelight, but not all inflation is created equal. Underlying-inflation gauges, so core measures that strip out food and energy, or trimmed means that look through monthly volatility, are meant to reveal the persistent trend. But recent years are a reminder that the components dismissed as “transitory” don’t always reverse: supply shocks can lodge in prices and broaden out. 

We believe that today’s price pressures are largely of that kind, and monetary policy may not be the right tool for them. Higher rates can stifle demand, but they can’t lower oil prices, reopen trade routes, or repair supply chains. And yet, market expectations have moved from several rate cuts to the possibility of a rate hike during Kevin Warsh’s first year as chair of the US Federal Reserve. And through it all, global equity markets have been pushing higher, though via increasingly narrow leadership of a small group of large technology companies. What’s the Multi Asset Boutique’s take? Find out in the latest CIO Monthly video. 

  Key Takeaways  

1. Question marks around the Fed’s next moves
   Market expectations have moved from several rate cuts to the possibility of a rate hike during Kevin Warsh’s first year as chair of the US Federal Reserve.
   
   
2. Concentrated stock rally
   So far this year, a small group of large-cap technology companies has boosted global equity performance. This concentration, which started in the US, is now spreading globally and is a risk we continue to monitor closely.
   
   
3. Tweaks to our asset allocation
   The Multi Asset Boutique has trimmed its positioning in European equities to neutral from overweight. In turn, it upgraded high-yield bonds to overweight from underweight.

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