Chart of the week – A hawkish pivot ( 12 Jun 2026) | HSBC AM

HSBC: A key theme of our Mid-Year Outlook is that the global economy is currently being shaped by what we call “two shocks and a boom”. These forces are creating a difficult environment for central banks and have, so far, driven a hawkish pivot. But what does this all mean for markets?

These forces are creating a difficult environment for central banks and have, so far, driven a hawkish pivot. The ECB's rate rise, despite slowing growth, is intended to reduce the risk that the energy shock lifts medium-term inflation expectations. In the week ahead, three other major central banks will decide whether to stick or twist. The Bank of Japan looks likely to hike, given its still-negative real policy rate. The Bank of England is expected to stay on hold while it monitors a weakening labour market, but it may need to hike later this year to rebuild inflation credibility.

The backdrop also makes for a challenging first meeting for the new Federal Reserve Chair, Kevin Warsh. The Fed is widely expected to keep rates unchanged and to remove any bias towards easing this year from its statement and projections. The key question is whether it validates market expectations for further tightening. Overall, spikier inflation and a rise in hawkish central bank thinking reinforce the complicated macro landscape. While episodic volatility is a risk, supernormal profits and a manageable cost of capital mean that markets can still perform well through the rest of 2026. #MidYearOutlook #rates #policy