As expected, the ECB hiked rates by 25 basis points the first increase since 2023.
The ECB lifted its main refinancing rate to 2.40% and its deposit facility rate to 2.25%, citing inflation pressures following an Iran conflict-driven energy shock that pushed eurozone inflation to 3.2%. The surprise move comes as the eurozone economy shows signs of weakness, with GDP contracting 0.2% in Q1. Policymakers said the hike is aimed at preventing higher energy prices from becoming embedded in broader inflation. While this may draw criticism from some given the current growth context, the Bank actually has little choice. Unlike the Fed’s dual mandate of inflation and employment, the ECB has a single mandate: price stability. Note a big jump in the ECB's 26/27 inflation forecasts, offset by a drop in GDP forecasts HICP 2026: 3.0%, from 2.6% in March HICP 2027: 2.3%, from 2.0% HICP 2028: 2.1%, from 2.0% GDP 2026: 0.8%, from 0.9% GDP 2027: 1.2%, from 1.3% GDP 2028: 1.5%, from 1.4%
In case you haven't noticed, there is just a tad excess liquidity out there...
SOFR – FF is the spread between two key US short-term rates: 1/ SOFR (Secured Overnight Financing Rate): the rate at which financial institutions borrow cash overnight, collateralized by US Treasuries (i.e. in the repo market). 2/ FF (Federal Funds rate, usually the effective fed funds rate, EFFR): the rate at which banks lend reserves to each other unsecured overnight. So the spread is secured rate minus unsecured rate. Under textbook conditions, secured borrowing is cheaper than unsecured borrowing — you're posting Treasuries as collateral, so the lender takes less risk and accepts a lower rate. That makes SOFR – FF slightly negative (typically a few basis points below zero) in calm markets. This is the "normal" state. SOFR materially below FF — usually means abundant reserves and ample cash chasing limited collateral. Cash holders accept low secured rates because they have nowhere else to put it. This is typically a sign of: - The Fed's RRP (reverse repo facility) being heavily used - QE having left the system flush - or scarcity of high-quality collateral (Treasury bills, in particular). Source: zerohedge
History has been kind to Fed Chairs in their first year. Besides Greenspan, who got handed Black Monday...
Source: TrendSpider
Today is officially Kevin Warsh's first day as the Fed chair.
Since 1930, the US stocks benchmark has seen an average 12% drawdown in the first 3 months after a new Fed chair has been elected. Source: Bloomberg, Barclays
Fed IRP (Interest Rate Probabilities) is telling us ~¾ of a hike is priced in for Dec2026.
August of 2024 the market was expecting 10 cuts… Source: Bloomberg, RBC
More sell-side firms and Fed watchers are removing/delaying cuts from their outlook, including a couple forecasters after the April NFP.
Half now see no cuts this year (and risks are clearly tilted to this group continuing to grow given inertial nature of these forecasts). Source: Nick Timiraos
The Chinese central bank remains the most unwavering “buy-the-dip” force in gold.
Source: Shanghai Macro Strategist
The Fed is steadily loading up on U.S. Treasuries at a pace not seen since 2008
$237 billion in purchases since December 2025. Total holdings now sit at $4.4 trillion, the highest since July 2024. More striking: Treasuries now make up 65.9% of the Fed's total assets, the highest share since March 2008. That's a central bank stepping in to hold up a bond market under pressure from record fiscal spending. The question is how long it can keep doing it before the balance sheet becomes the story. Source: Bloomberg, Arbor Data Science
