Citic: Iran Situation Escalates, Expectations of Rate Cuts by Western and European Central Banks Reverse to Rate Hike Expectations

China Financial News, March 25 — China International Capital Corporation (CICC) reports that recent tensions in Iran have escalated further, leading to a rise in crude oil prices and increasing concerns about stagflation in the US and European economies. Last week was a “Super Central Bank Week,” during which the Federal Reserve, the European Central Bank, and the Bank of England all issued hawkish signals, causing investors to significantly raise expectations for future monetary policy paths. The implied timing for the Federal Reserve to cut interest rates in the futures market has been pushed back to the second half of 2027, with some expectations of rate hikes in 2026. Meanwhile, the ECB and the Bank of England’s expectations have shifted from rate cuts to rate hikes. If overseas central banks begin to raise interest rates, it will lead to a tightening of global macro liquidity, causing significant declines in global stocks, bonds, and gold. The policy choices of central banks in response to oil price shocks are currently central to global asset pricing, and CICC believes there may be noticeable differences in market expectations.