BNY's report discusses the current expectations in the fixed income markets, particularly regarding the European Central Bank's monetary policy. With inflation figures in France nearing deflation, the report suggests that the ECB is unlikely to pivot towards easing in the near term, as labor markets remain tight across the Eurozone.

ECB policy outlook

"We believe the majority of the Governing Council will opt to wait until the March forecasts. Furthermore, the hawkish members of the Governing Council may also point to current behavior in yield curves, as there is little sign of flattening that would indicate concern over inflation trajectories."

"Despite ongoing divergence in rate paths, there has been a general lean away from further easing among developed market central banks over the past cycle."

"We continue to err on the downside of inflation risk, particularly if national governments take broader concerns over fiscal dominance seriously and this is coupled with the restraining impact of a strong EUR."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)