The European Central Bank (ECB) next meets on June 6, the day it is expected to announce a 25 basis point rate cut. “Rate markets have pretty much already planned for this, but it will be harder for the ECB to communicate what will happen after the next rate cut and harder for markets to estimate,” he says. Orla Garvey is a senior fixed income portfolio manager at Federated Hermes Limited.
In this sense, Garvey explains that the inflation path is likely to be very turbulent, and if we add to this the improving growth prospects in the eurozone, “markets may less confidence in the future trajectory of ECB benchmark interest rates and a tendency towards some reduction in 2025, as has happened in recent weeks,” he comments.
In its turn, Louise Dudley, Global Equity Portfolio Manager, Federated Hermes Limited believes that the “higher interest rates for longer duration hypothesis” exists as a “dispersion of opportunity across geographic regions.” “While the momentum in the US is pushing valuations higher, European stocks are starting to look cheap, especially given their dividend yields,” he explains.
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