We view the recent decline in interest rates as part of a downward correction. On balance, interest rates are likely to increase further because the factors responsible for the rise in rates have not abated and government bonds have become riskier. The outcome of the U.S. midterm elections could set off developments that trigger the next phase of rising interest rates.

How much further do central banks need to raise interest rates to bring inflation back to 2%? That depends on second-round effects and on uncertain potential growth. The answer differs between the US and Europe, and that difference has major consequences for EUR/USD. Read our latest currency report to see how far those consequences reach and how the other major currencies respond.

For central banks, the reasons to raise interest rates further are mounting. The markets are pricing in several more rate hikes through the end of 2027. However, there are also good reasons why central banks should exercise caution. In this report, we outline all the reasons and our specific expectations for European and U.S. market interest rates.