Inflation or activity? Central banks may have to choose

With macro momentum weakening and inflation remaining sticky, the risk of stagflation in the eurozone is growing, but the ECB’s expected reaction is clear to investors: cut rates to support activity. All the more so in that the tariffs promised by president-elect Trump are likely to complicate the cycle’s rebound a little further. Even in the United States, the Trump trade is now in the doldrums, with investors showing renewed interest in bonds in the face of a long-term inflation outlook that is less risky than initially forecast.