Global growth appears to be regaining momentum, led by the US among advanced economies. We expect this trend to continue, supported by strong AI investment despite the risk posed by renewed hostilities in Iran. Assuming the conflict abates, inflation should return to central banks' targets in the coming months as evidence of second-round effects remains scarce. We therefore do not expect further rate hikes from the ECB or the Bank of England, given the relative weakness of the euro-zone and UK economies. Most emerging market central banks, however, will retain a tightening bias to safeguard policy credibility, for the rest of the year at least. Meanwhile, stronger US growth and sticky core inflation look set to keep the Federal Reserve on a more hawkish path than markets currently anticipate.
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