Forward Guidance argues that central banks are losing control as inflation, oil shocks, and political pressure collide. Their view is that markets are underpricing how unstable the next phase could be.
Key Points
Key Highlights:
- The Fed meeting showed rare disagreement, with officials split on whether policy should lean toward cuts or stay restrictive
- Markets now see little chance of rate cuts in 2026 unless a real crisis forces the Fed’s hand
- Oil and commodity shocks are feeding a new inflation wave, making a 1970s-style setup more likely
- The Fed sounds hawkish, but its balance sheet is still expanding, meaning liquidity has not fully disappeared
- Governments are using fiscal spending and defense investment to support growth, which keeps inflation pressure alive
- Global bond yields are rising, especially in Japan and Europe, creating stress for currencies and carry trades
- Risk assets remain strong, but that strength depends heavily on policy support and market confidence
Final Takeaway
Forward Guidance’s message is that the system is fragile. Central banks may want control, but inflation, debt, and geopolitics are making that control harder to maintain.
