Global markets face prolonged impact from higher rates

The Bank of America report reflects that the US monetary tightening cycle may not be in its final stages; it could head toward further interest rate hikes as inflation persists and economic activity remains strong. The anticipated rise in interest rates, potentially exceeding 5%, is exerting pressure on the bond markets, leading to higher borrowing costs and a decline in stock prices, with the 10-year Treasury yields surpassing 5%. Additionally, this supports the dollar and poses a challenge to gold, especially amid rising yields and inflationary pressures. Meanwhile, oil prices are influenced by a balance between increasing costs and their impact on demand and economic growth. Current outlooks suggest that markets need to reassess the concepts of the "terminal rate" and the impact of inflation on fiscal policies, while closely monitoring the relationship between yields, inflation, and the dollar.

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