This week bond markets were unsettled by US inflation rising for the second month in a row. CPI and core inflation both increased as services prices continue to rise swiftly. Markets have quickly reversed assumptions they held only a few weeks ago and the Federal Reserve is now expected to cut rates no earlier than August and the number of rate cuts expected has fallen to just two. The big drop in bond values serves as a reminder of how poor markets and central banks have been at forecasting inflation over the last few years.
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