Εβδομαδιαία Επισκόπηση: Διεθνής Οικονομία & Αγορές, 24/03/26
Central banks are attentive of upcoming inflationary pressures, with long-term government bond yields at multi-year highs
Developments in the Middle East and the related uncertainty regarding the likely duration of the conflict, as well as the ongoing energy infrastructure destructions, keep investors on edge. Oil price volatility remains substantial, with Brent crude up by +8.8% wow to $112/barrel, the highest since July 2022, albeit prices eased towards $100/barrel on Monday 23rd.
The MSCI ACWI was down by -1.8% wow, with large swings following on Monday 23rd, when the US announced a holding-off of strikes on energy infrastructure for five days, citing “productive” talks with Iran. The MSCI ACWI ended the day at +0.4% (-6.8% since the start of the war in late February).
Inflation concerns due to higher energy costs and a further repricing of monetary policy expectations towards a more hawkish stance continued to feed through to higher sovereign bond yields, albeit a partial decline took place on Monday. Having said that, 10-Year Bund yields have increased by +37 bps month-to-date to 3.02% -- the highest level since July 2011 -- with the 2/10s curve bear flattening and euro area periphery bond spreads widening by circa +30 bps for the same period.
The European Central Bank (ECB) held policy interest rates stable, as expected, with the Deposit Facility Rate at +2.00%. On forward guidance, the data-dependent and meeting-by-meeting approach remains in place, albeit the ECB expects substantial upside pressures on inflation, the extent of which will depend on the developments in the Middle East.
With technical assumptions based on financial market expectations as of March 11th (including oil and European natural gas prices, euribor and long-term rates, foreign exchange rates), the ECB revised meaningfully down compared with three months ago its projections for euro area real GDP growth, by -0.3 pps to +0.9% in 2026, in view of higher prices weighing on households’ purchasing power and of business confidence taking a hit from uncertainty. At the same time, the projections for CPI inflation were substantially revised up, by +0.7 pps to +2.6% on average in 2026, peaking at +3.1% in Q2:2026 according to the baseline scenario.
In an adverse scenario in which Brent averages $119/barrel in Q2:2026 and TTF natural gas averages €87/Mwh, +33% & +73% respectively compared with the baseline, real GDP growth is envisaged at +0.6% in 2026 and headline CPI inflation at +3.5%. Note that in line with standard practice, the adverse scenario assumes unchanged monetary and fiscal policy compared with the baseline. According to overnight index swaps (OIS), investors’ expectations regarding the path of the DFR have moved up by c. +75 bps month-to-date for end-2026, pointing to 2.75%.
The Federal Reserve stood pat, as expected, with the Federal Funds Rate (FFR) at a range of 3.50% - 3.75%. Apart from an anticipated upward effect on inflation, +0.3 pps versus December’s projections to +2.7% yoy in Q4:2026, the Fed refrained for the time being from further explicit assessments of the repercussions from the war in the Middle East, citing the high respective uncertainty.
In that context, Fed projections continue to point to one cut to a range of 3.25% - 3.50% by end-2026 and another one during 2027, albeit Chair Powell urged towards taking these assumptions “with a grain of salt”. According to overnight index swaps (OIS), investors’ expectations regarding the path of the FFR have moved up by c. +60 bps month-to-date for end-2026, pointing to 3.70%.
Developments in the Middle East and the related uncertainty regarding the likely duration of the conflict, as well as the ongoing energy infrastructure destructions, keep investors on edge. Oil price volatility remains substantial, with Brent crude up by +8.8% wow to $112/barrel, the highest since July 2022, albeit prices eased towards $100/barrel on Monday 23rd.
The MSCI ACWI was down by -1.8% wow, with large swings following on Monday 23rd, when the US announced a holding-off of strikes on energy infrastructure for five days, citing “productive” talks with Iran. The MSCI ACWI ended the day at +0.4% (-6.8% since the start of the war in late February).
Inflation concerns due to higher energy costs and a further repricing of monetary policy expectations towards a more hawkish stance continued to feed through to higher sovereign bond yields, albeit a partial decline took place on Monday. Having said that, 10-Year Bund yields have increased by +37 bps month-to-date to 3.02% -- the highest level since July 2011 -- with the 2/10s curve bear flattening and euro area periphery bond spreads widening by circa +30 bps for the same period.
The European Central Bank (ECB) held policy interest rates stable, as expected, with the Deposit Facility Rate at +2.00%. On forward guidance, the data-dependent and meeting-by-meeting approach remains in place, albeit the ECB expects substantial upside pressures on inflation, the extent of which will depend on the developments in the Middle East.
With technical assumptions based on financial market expectations as of March 11th (including oil and European natural gas prices, euribor and long-term rates, foreign exchange rates), the ECB revised meaningfully down compared with three months ago its projections for euro area real GDP growth, by -0.3 pps to +0.9% in 2026, in view of higher prices weighing on households’ purchasing power and of business confidence taking a hit from uncertainty. At the same time, the projections for CPI inflation were substantially revised up, by +0.7 pps to +2.6% on average in 2026, peaking at +3.1% in Q2:2026 according to the baseline scenario.
In an adverse scenario in which Brent averages $119/barrel in Q2:2026 and TTF natural gas averages €87/Mwh, +33% & +73% respectively compared with the baseline, real GDP growth is envisaged at +0.6% in 2026 and headline CPI inflation at +3.5%. Note that in line with standard practice, the adverse scenario assumes unchanged monetary and fiscal policy compared with the baseline. According to overnight index swaps (OIS), investors’ expectations regarding the path of the DFR have moved up by c. +75 bps month-to-date for end-2026, pointing to 2.75%.
The Federal Reserve stood pat, as expected, with the Federal Funds Rate (FFR) at a range of 3.50% - 3.75%. Apart from an anticipated upward effect on inflation, +0.3 pps versus December’s projections to +2.7% yoy in Q4:2026, the Fed refrained for the time being from further explicit assessments of the repercussions from the war in the Middle East, citing the high respective uncertainty.
In that context, Fed projections continue to point to one cut to a range of 3.25% - 3.50% by end-2026 and another one during 2027, albeit Chair Powell urged towards taking these assumptions “with a grain of salt”. According to overnight index swaps (OIS), investors’ expectations regarding the path of the FFR have moved up by c. +60 bps month-to-date for end-2026, pointing to 3.70%.