Markets count on a smooth landing
The central theme of the review period was the waxing and waning of financial markets optimistic expectations over the policy outlook. Until late December, financial conditions continued to ease, driven by investors anticipating looser policy in the near term. Since January, financial conditions firmed and tightened, as central bank communication pushed back against such expectations and data releases pointed at more stubborn inflation pressures. Sovereign bond yields declined on balance during the period, while valuations of risky assets generally rose. Supported by resilient risk sentiment, emerging market economies (EMEs) experienced bond inflows, and (except China) their stock markets extended gains.
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The views expressed here do not necessarily reflect the views of the BIS member central banks.