Stephen Miller from GSFM predicts that numerous key central bankers, including Jerome Powell, will deliver a message of assuredness at the upcoming gathering in Jackson Hole, Wyoming. Despite substantial progress in inflation control over the last few months, Stephen opines that the Fed will refrain from an early victory declaration. He anticipates that Powell will affirm the need to maintain the policy rate at least at current levels well into 2024, to avoid sparking a bond rally. Contrasting the US and Europe, Stephen points out that while the US is experiencing activity growth and a steady labor market, Europe faces an economic downturn. The PMI numbers reflect this difference, highlighting challenges in Europe, while indicating significant activity momentum in the US. Despite these inflation concerns, Stephen seems to have a favourable outlook towards the bond market. Based on his understanding of the chart, Stephen suggests that the current level is fairly reasonable, with the concern residing in central banks’ ability to manage inflation. If they falter, the markets may seek to impose an inflation premium on the 10-year bond yield, leading to potential upside. Nevertheless, Stephen is hopeful this won’t transpire.

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