Interest rate hikes expected for summer | Morning Markets

Added: 2026-05-27

[00:00:00]Equities continued to power higher.

[00:00:08]Good morning and welcome to Morning Markets.

[00:00:11]There was some relief from the bond markets last week as a drop in the oil price as a result of better news from the Middle East caused bond yields to fall between 5 and 10 basis points in developed markets. However, we are far from being out of the woods yet. US consumer confidence showed short and long-term inflation expectations rising last week.

[00:00:34]The risk is that inflation expectations start to become embedded. The US Federal Reserve's preferred measure of inflation is released this week and is likely to show inflation still above 3% which will make it even harder for the doves on the committee to argue the case for further interest rate cuts. Inflation data from Germany on Friday is also likely to show inflation above 3% and the ECB are widely expected to hike interest rates when they meet in early June.

[00:01:05]Despite these concerns, equity investors remain jubilant. Company earnings have been surprisingly strong. AI capital spending and memory shortages are propelling memory producers earnings to dizzying heights and earnings breadth is starting to appear.

[00:01:23]Investors now have to cope with a deluge of supply in coming weeks. The SpaceX IPO is in a couple of weeks and Open AI it's IPO is to follow later in the year.

[00:01:35]More broadly, reduced equity buybacks and subdued private equity activity mean that after years of shrinking, the equity market is now expanding again in the US. This video is not a recommendation or personal financial advice. With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest.