As expected, last week was full of central bankers' meetings. No less than three central bank decisions were expected: the SNB, the Fed and the BoE. Whether on this side of the Atlantic or the other, the fight against inflation remains a priority. It must be said that the US CPI (excluding energy and food) is still above 5.50% while the Fed rate is "only" 5.00%. In other words, real rates (the difference between interest rates and inflation) are still negative and are in fact fueling inflation: economic agents are indeed encouraged to take advantage of the leverage effect of credit.

10Y US (white), Core CPI (blue) and Fed Funds (red)

However, 10-year interest rates have just hit a new low since the beginning of the year, a sign that investors are starting to seriously worry about the negative consequences of such a restrictive policy. We cannot hold this against them. Historically, it must be said that every episode of monetary tightening has eventually resulted in a crisis: the Latin American debt explosion in 1982, the 1987 crash, the LTCM bankruptcy in 1998, the bursting of the internet bubble in 2000, the subprime crisis in 2007 and BKLN in 2018. From there to say that the SIVB bankruptcy marks the beginning of a systemic crisis, it is only a (small) step.

If this is indeed the case, it is likely that the Fed and its colleagues will change their monetary policy, as financial stability takes precedence over price stability. This explains in part the expectations for rates, which are still based on an easing this summer. However, we should keep in mind that rates will fall before the indexes reach their low point. The worst is perhaps (still) to come.