Amundi Says U.S. Rate Hikes Unlikely Despite Hot Inflation and Strong Jobs Data

The Quick Take

• Amundi's analysis concludes U.S. rate hikes are unlikely in the near term despite elevated inflation and resilient employment.
• Former Fed chair Janet Yellen also does not expect near-term rate increases, citing oil price uncertainty as a dampening factor.
• The divergence between rate-hike fears and expert forecasts creates opportunity in rate-sensitive bond and equity positioning.

Business Times Singapore reports that asset manager Amundi has concluded U.S. rate hikes remain unlikely despite the combination of elevated inflation and strong employment data that would typically compel the Federal Reserve to tighten. The analysis is notable given that prediction markets and bond markets have been repricing rate-hike probabilities higher on recent hot CPI prints. Amundi's contrarian position aligns with commentary from former Fed chair Janet Yellen, who has also cited uncertainty around oil prices as a reason to expect the Fed to hold rather than hike in the near term, even as inflationary data exceeds targets.

The investment implication of an extended hold scenario is significant across multiple asset classes. Rate-sensitive equities — including real estate investment trusts, utilities, and long-duration growth stocks — would benefit from any delay in Fed tightening. Bond markets would see relief in the 10-year Treasury yield, which has been repricing higher on rate-hike fears. For Singapore investors, the Fed's direction influences MAS exchange-rate policy and SGD asset valuations, particularly since Singapore uses the exchange rate rather than interest rates as its primary monetary policy tool. An extended Fed hold would reduce USD strength and provide breathing room for Asian currencies.

The key signals to watch are the next FOMC meeting minutes for hints of the internal debate around the hike threshold, the May and June CPI releases which will confirm or challenge the 'transitory' or 'oil-driven' inflation narratives, and Fed chair Kevin Warsh's public communications. The macro variable that determines whether Amundi's hold thesis holds is oil price trajectory — if oil prices moderate on a Iran ceasefire, inflationary pressure eases, validating the no-hike view; if oil stays elevated, the Fed may be forced to hike despite the growth cost.

Synthesized from 1 source.