As we saw in the article of 08 March 2024, the various indicators are improving in many parts of the world, but caution reigns on the markets. The Western economies are undecided, due to a number of economic and geopolitical factors. Indeed, armed conflict and existing inflation are the two major issues that will influence Central Bank decisions this year. What scenarios are envisaged? And why? Wealth A7 explains in this week's article.

What is the impact of conflicts?

As we mentioned in a previous article, the price of oil is a major factor in inflation. Given the large oil stocks in these parts of the world, the instability caused by current wars, particularly in the Middle East, is significant. Indeed, recent events have caused the price of Brent crude oil to jump back above $90 for the first time since October. This pressure on energy prices could trigger a resurgence in inflation.

Where do the various indicators stand? Why is this important?

In the United States, a key economy, employment figures were particularly good in March, beating forecasts. This shows that the economy is resilient. In Europe, on the other hand, the figures confirm that inflation has stabilised at a low level, with a downward trend and timid growth. This difference in "economic vitality" could lead to a shift in fiscal policy.

What are the central banks going to do?

Since one of the aims of central banks is to control or regulate inflation by acting on key interest rates, a premature cut in interest rates combined with the inflationary pressure of oil prices could put a stop to the current economic recovery. On the other hand, keeping key rates high during a period of low inflation could slow growth.

Today, the markets are anticipating a cut in key rates over the course of the year in both Europe and the United States. The ECB is hinting at a rate cut in June, but the Fed remains more cautious, given the good economic indicators and while waiting for more visibility on oil prices.

Against this backdrop of continuing uncertainty, there are strategies for securing asset allocations. Financial market professionals such as Wealth A7's wealth management advisers are here to help you take advantage of investment opportunities and support you in the creation and development of your assets - contact us!

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