Persistent Inflation Leaves Central Banks Trapped

BlackRock says inflation pressures were already entrenched before the Middle East supply shock, leaving policymakers with little room to support growth. 

• Markets have rapidly priced out U.S. rate cuts in 2026 as energy and input costs rise.
• BlackRock expects the Fed, ECB, BoE and BoJ to broadly hold rates steady this week.
• The firm remains overweight U.S. and EM equities, citing accelerating AI monetisation and earnings strength.
• It stays underweight long-term government bonds, calling them less effective diversifiers in a higher-inflation regime.

The old playbook assumed weaker growth meant lower yields. That relationship now looks far less reliable.