Geopolitics more likely to affect ECB than the Fed

For now, we don’t expect the geopolitical developments to alter the behaviour of the major central banks. Provided that the political crisis in Italy does not flare up again, we think the ECB is likely to unveil its timetable for winding down QE at its July meeting and to end its asset purchases this year. Meanwhile, the US Fed will probably press on with three more rate hikes this year, and we think that the Bank of England will also raise rates more than markets anticipate, with the next hike coming in August. The Bank of Japan, however, will probably leave its policy settings unchanged indefinitely.