Overview

At a time when inflation is already running above the Federal Reserve’s target, a conflict in the Middle East threatens to drive up oil price volatility, further increasing the threat of a US economic stagflation. You could have read that same sentence in the 1970s. And yet, the statement rings true for today – this past month, many of the swings in asset prices were driven by the conflict between Israel and Iran.  The current round of escalation began on June 13, when Israel launched a military strike against Iran, targeting nuclear facilities. Following a week of air strikes between Israel and Iran, the United States directly intervened in the conflict, attacking three Iranian nuclear sites on June 21. By Tuesday, June 24^th, an Israel-Iran ceasefire was declared. It remains to be seen whether and how long the truce will hold.

When a similar series of events played out in the 1970s, market moves were dramatic, with oil prices rising more than 300% following the 1973 oil crisis and then again doubling after the 1979 oil crisis, creating significant spikes in inflation and de-anchoring inflation expectations. It ultimately required unprecedented levels of interest rates (known as the Volcker shock) and significant economic slowing and depressed demand to bring inflation back to acceptable levels and investors needed years recoup losses from the resulting sell-off in equities and fixed income.

By comparison, market price moves this past month were fairly modest, with oil prices now having fully reverted to pre-conflict levels. This outcome coincides with the best-case scenario market participants had envisioned, with no meaningful disruption to oil supply). Not only was the conflict short-lived, and left oil and gas infrastructure intact, the world is also awash with oil, unlike the 1970s. Following the unwinding of OPEC+ production cuts and increasing supply from countries including the US, Canada, Brazil, Guyana, and Argentina, supply is set to more than meet demand growth in coming years, based on projections from the International Energy Agency June 2025 outlook. In addition, Iran only accounts for ~4% of world oil supply, so while the loss of Iranian oil supply would have been significant (reflected in the jump in oil prices we saw after the initial conflict escalation mid-Month), it would have played out against a backdrop of significant supply flexibility to fill the gap. The worst-case scenario markets feared was one associated with the closure of the Strait of Hormuz, a critical oil and natural gas transportation chokepoint.  Such a scenario would have likely caused a global crisis, drawing the US directly into the conflict and alienating potential Gulf state mediators and China which rely on the passage as well. When seen in this context, it’s not surprising that market volatility was modest.

Does this mean the US economy is out of the woods and the threat of stagflation has been avoided? It would be preemptive to write off those risks, even as the US economy has so far remained more resilient and inflation has remained more benign than feared. Even with the threat of an energy crisis averted (for now), there are more than a few ongoing challenges threatening US growth and creating inflationary pressures – ongoing high uncertainty regarding trade policies and the upcoming July 9^th deadline for trade negotiations, effective tariff rates running at the highest level since pre-WWII, mass deportations and effectively halted inbound immigration, and a proposed budget bill that the CBO estimates will increase the 10-year cumulative deficit by $2.8tln, with federal debt held by the public reaching 124$ of GDP by 2034 (estimates are as of June 30^th based on the OBBB passed by the House). For example, at the time of writing, while the US and China announced agreement on a trade framework, the US Administration also indicated an end of trade talks with Canada, threatening to set a new tariff rate. The impacts from these policy changes have likely been partially mitigated by tariff front-running for the time being (for example, inventory buildup significantly distorted the first quarter US GDP headline print). In addition, the US economy may be more resilient that anticipated (as experienced following 2022’s monetary policy tightening, to the surprise of many forecasters), benefiting from slow-moving productivity and disinflationary gains from AI technology implementation, investment spending related to AI that is less sensitive to rates and cyclical economic conditions, and healthy corporate and household balance sheets after years of muted credit creation. Still, it’s too soon to declare victory and it will be several months until the true impact of the slate of simultaneous policy changes can be assessed.

Looking around the rest of the world, global economies will need to adjust to a new world of trade fragmentation and increasingly isolationist policies from the US. On the trade side, regardless of the specifics, higher US trade-barriers and reduced US-China trade are likely set to be the new norm.  For most of the world, this will be disinflationary and will weigh on growth, due to reduced US demand and to increasing competition as Chinese goods will likely be redirected as Chinese exporters seek alternative markets to the US. That’s not to say there won’t be opportunities – some economies may serve US demand, backfilling China’s US market share. Still, it’s likely we will see more economies implementing their own trade defenses (i.e., tariffs, anti-dumping policies, etc.), with implications for global efficiency losses and supply chain disruptions. We may also see more governments protect their domestic manufacturing industries by ramping up domestic defense procurement – an action which would also answer the US’s call to allies to spend more on defense themselves instead of relying on the US. We’re already seeing many economies across both Europe and Asian announcing ramped up defense spending plans. This ramp up in defense spending may help shore up certain domestic industries and industrial capacity (if deployed via domestic procurement). The rewriting of global trade and finance rules will also have significant implications for global financial markets, raising the specter of capital market fragmentation. Global investors are reportedly reassessing the role of the US dollar, their exposure to US assets, and rethinking portfolio diversification. All this at a time of rising global long-term interest rates, due to rising actual and expected fiscal deficits in advanced economies, higher public debt levels and a pullback by central banks as the marginal buyers.

The charts below scan across market action for key markets year-to-date. The line markets the initial intensification of the Israel-Iran conflict, June 13th. All prices are indexed to the start of the year. Following the initial intensification of the conflict, energy prices jumped modestly, and equity indices stumbled, but repricing was modest – far from the more notable moves you’d expect if investors priced in a full-blown global energy conflict.  Year to date, market action moves are more significant – while global equities are reaching highs and yields have remained largely range bound, the dollar weakness, rising term-premiums, and the gold rally this year signal more investor concerns regarding US exceptionalism and stagflation fears. Looking forward, with lower liquidity in the summer months as more traders are away from their desks and potential complacency on tariff impacts and on trade negotiation progress (The Trump Administration recently said the July 9^th deadline for securing new trade deals is “not critical”), risk assets may be especially vulnerable to shocks in the coming weeks.

Energy Market Impacts from the Israel-Iran Crisis

After Israel attacked Iran’s nuclear facilities and military leadership on June 13^th, global oil prices jumped modestly and equity market indices stumbled. Global oil prices have more than fully reverted – Not only was the conflict short-lived, but key oil and gas infrastructure was left intact. This outcome coincides with the best-case scenario market participants had envisioned, with no meaningful disruption to oil supply). Now, it remains to be seen whether that ceasefire will hold or whether there will be another escalation of the conflict in the region. Conflicts are always hard to predict. They involve more than just economic and financial considerations, and the cone of outcomes can be very wide. That said, looking at the most recent episode, investors have highlighted the following factors as a reason to assign low odds to a worst-case scenario of a full-fledged global crisis, even in the event that conflict continues in the region:

1. The world is more than awash in oil. Between rolled back OPEC+ production cuts and greater supply from countries including the US, Canada, Brazil, Guyana, and Argentina, supply is set to more than meet demand growth in coming years, based on projections from the International Energy Agency June 2025 outlook. Technological change has also helped insulate the oil market from shocks. The faster capital and production cycle of US shale, means that production can respond within months, not years. “Based on the fundamentals, oil markets look set to be well-supplied in the years ahead – but recent events sharply highlight the significant geopolitical risks to oil supply security. When it comes to energy security, there is no room for complacency,” – IEA Executive Director Fatih Birol.
2. It’s unlikely that Iran would or could force a closure of the Strait of Hormuz. The Strait of Hormuz, located between Oman and Iran, is one of the world’s most important oil chokepoints. Large volumes of oil flow through the strait, primarily destined for Asian markets, and very few alternative options exist to move oil out of the strait if it is closed. In 2024, oil flow through the strait averaged 20 million barrels per day (b/d), or the equivalent of about 20% of global petroleum liquids consumption and about 20% of global liquefied natural gas (LNG) trade (largely coming from Qatar) is transited the Strait of Hormuz. Closing the Strait would be cause for a global energy crisis, but doing so would alienate other countries in the region and a key ally of Iran, China.
3. Oil is still important, but this isn’t the 1970s. Columbia University’s Center on Global Energy Policy points out that back then one barrel of oil was responsible for $1,000 of gross domestic product. Today it is less than half that.

 International Energy Association, Columbia University Center on Global Energy Policy

US Stagflation Risks

As we’ve discussed in prior Roundups, we expect tariffs to be stagflationary for the US economy – weighing on growth and putting upward pressure on inflation. So far, while reduced spending plans and intensions  to raise prices have shown up across a rash of surveys, most hard economic data has shown more modest impacts from the tariffs. Just last week, core PCE, the Fed’s favored indicator, was a bit higher than expected but still came in lower than it was earlier in the year, at 2.7% year-over-year. And while the University of Michigan sentiment survey still shows elevated inflation expectations, the latest print showed a tick down in inflation expectations, possibly as tariff expectations have also moderated. Altogether, inflation has consistently surprised to the downside this year (below, we show the Citi inflation surprise index – which measures how inflation stats have come in relative to consensus forecast expectations), potentially leading to complacency in markets regarding stagflation risks (particularly as inflation surprises have demonstrated seasonality in recent years, with more downside surprised in H1 and more upside surprises in H2).

Bloomberg

In part, the impacts from today’s policy slate may have been more benign than expected so far because other dynamics playing out in the US economy have been offsetting. A few that we would call out as especially salient – (1) AI technologies are driving a surge in investment spending that is less sensitive to cyclical conditions and rates than typical investment spending, (2) that same build out in AI technologies is likely creating productivity gains – adding to growth and countering other inflationary pressures – although how diffused across the economy these gains is still debated, and (3) corporate and household balance sheets are in aggregate relatively delivered after several years of muted credit creation (swings in credit tend to drive the largest swings in spending in economic downturns).

Overall though, we expect the impacts from today’s policy slate are more still ahead of us than behind us – it may be several months still until the full impact can be assessed given the length and complexity of global supply chains. For one, corporations take time to pass through price increases and many businesses significantly built-up inventories in the months immediately post the US-election, which are further delaying the impacts of tariffs. But bottom line – the 3x spike in tariff revenues paid by U.S. importers (at this point has to show up somewhere in US economic data if not absorbed abroad– either in higher prices paid by consumers or in lower US corporate margins and profits. Ultimately, the impact on economic activity and inflation will depend on the level of tariffs and the length of time during which these tariffs will be in place. And the end game is unclear at this point.

It is possible that firms may decide for a number of reasons (for example, if raising prices dampened volumes as customers experience too much sticker shock, led to market share losses, or irreparably damaged business relationships) to absorb the tariff increase in their margins and not pass the on to consumers – with the impact showing up less in inflation but rather as a hit to corporate profits. Corporate profits are running at an all-time high, so there may be room for corporate profit margins to take a temporary hit. There is some evidence that is what is occurring – a market report compiling corporate announcements on price hikes found that so far price increases have been fewer than anticipated (~50% tariff cost absorbed by consumer vs 70% expected by forecasters – see one example below). This would imply some compression in margins for corporates, with 2025 profit margin estimates seemingly already being impacted by tariff policy developments.

US National Accounts, Goldman Sachs

It’s also not to say there’s no signs of cracking in the US economy due to the tariffs. Just last week, the May PCE report showed signs of slowing income and spending, though it’s worth noting this particular economic stat is volatile, may have been impacted by consumer tariff front-running – we’re wary to read too much into the latest print. That said, at the same time, there are several signs that jobs are harder to come by even as aggregate unemployment rates have stayed low. For one, there are fewer and fewer job openings available relative to people looking for work as shown below, and continued unemployment claims have continued to rise modestly. The New York Fed also recently published an interesting chart with unemployment rates for different groups which showed today is one of the worst labor markets ever for recent college graduates.  Just this past week, the May PCE report also showed the weakest read on month over month consumer spending in over a year. But so far, these cracks are modest.

New York Fed, Bloomberg

As noted above, one possible reason the tariffs have had more muted impacts than feared on the US economy thus far is because other pressures are offsetting to support growth and pushing down inflation. Two perspectives on this below – the figure on the left shows capex spending by the major US hyperscalars. For these companies, spending to build out their AI capabilities is existential for the survival of their businesses. These companies are mostly highly profitable and cash rich. So in contrast to typical business investment, their capex spending outlook is less sensitive to economic cyclicality and uncertainty and to high borrowing rates. While the capex from these companies alone is not enough to prop up the economy, the total capex spending related to building out AI capabilities is in aggregate much higher (i.e., utilities / energy buildout needed to support the compute for AI, many other businesses investing in AI-related automation). As AI capabilities diffuse through the economy, there are expectations that this will lift productivity. A survey from the NBER shows these technologies are steadily gaining traction, with more and more firms saying they are using AI to produce goods and services.

NBER Business Trends and Outlook Survey, Goldman Sachs Investment Research

But while things have been better than feared, uncertainty is high – leaving the Federal Reserve on hold for the time being as policymakers wait for more data on how tariffs are impacting the US economy. It’s notable that the Fed’s own projections show a tilt towards stagflation, even as they project continued easing in policy rates next year. We show the June vs March 2026 projections below – the Fed expects higher unemployment, higher inflation, and fewer cuts compared to the prior projection but still continued easing next year. It’s also worth noting that there’s significant uncertainty around US monetary policy leadership, as President Trump has signaled he may name Chairman Powell’s successor further in advance than typical (as early as this fall), effectively creating a shadow Fed. While this possibility has raised concerns about threats to the independence of the Federal Reserve (and implications for risk premiums on US Treasury securities demanded by investors), traders appear to have revised down the path of monetary policy in expectations of a more dovish stance of policy.

“…the pass-through of tariffs to consumer price inflation is a whole process that’s very uncertain. As you know, there are many parties in that chain. There’s the manufacturer, exporter, importer, retailer, and consumer. And each one of those is going to be trying not to be the one to pay for the tariff. But together they will all pay. Or maybe one party will pay it all. But that process is very hard to predict. And we haven’t been through a situation like this. And I think we have to be humble about our ability to forecast it. So that’s why we need to see some actual data to make better decisions. We’d like to get some more data.” – Federal Reserve Chair Powell, June Press Conference

2026 Economic Projections of the Federal Reserve Board Members

Trade Redirection – Opportunities and Risks

Looking around the rest of the world, global economies will need to adjust to a new world of trade fragmentation and increasingly isolationist policies from the US. On the trade side, regardless of the specifics, higher US trade-barriers and reduced US-China trade are likely set to remain the new norm.  For most of the world, this will be disinflationary and will weigh on growth, due to reduced US demand and to increasing competition as Chinese goods will likely be redirected while Chinese exporters seeking alternative markets to the US.

Two perspectives on Chinese exports being redirected from the US to other third-countries – the figure on the left shows a historical perspective based on the 2018 US tariffs – For products hit by the 2018 US tariffs, the share of US imports from China decline in the tariffed goods, while the rest of the world absorbed the extra imports from China (China’s import shares in the rest of the world increased in those same goods). In total, percentage of Chinese exports absorbed by the rest of the G20 rose from 43.4% in 2017 to 52.3% in 2023. The figure on the right shows WTO estimates for what we could see play out today – the WTO simulated an expected change in 2025 imports from China under the tariffs in place as of April 14^th. There are no precisions to these numbers and effective tariff rates are shifting frequently as policies and legal rulings change, but they illustrate the increasing competition domestic producers in third-countries will be facing as China supply is redirected away from US consumers.

Rhodium Group, WTO

Absent more material stimulus from China to kick-start stronger domestic demand (and thus rely less on an export-led growth model, which would talk time to implement), other economies will likely implement their own trade measures (i.e., tariffs, anti-dumping policies, etc.), with implications for global trade, efficiency losses and supply chain disruptions, as well as for capital market fragmentation.  We’re already seeing the world hurdle towards fragmentation with a slew of anti-dumping protectionist measures being announced in recent months. Some examples of antidumping measures recently featured in the news:

• India imposes anti-dumping duty on six Chinese products – Daily Excelsior
• EU initiates anti-dumping investigation into Chinese-origin 1,4-butanediol |CCFGroup
• Malaysia imposes anti-dumping duties on iron, steel imports from 4 countries
• South Korea to levy 38% anti-dumping duties on Chinese steel products – KED Global
• And there’s likely more coming down the pipe as lobby to protect domestic industries will only ramp up – one example: “The EU should impose countervailing duties on imports from third countries if they violate EU anti-dumping or anti-subsidy rules. China is a particular focus here with its aggressive export policy,” read the VDMA’s paper. Cheerleaders to critics: German machinery makers call for EU action on China

There will of course also be opportunities – third-countries (i.e., countries besides US and China) have an opportunity to gain US and China market share and as a result, some degree of production is likely to shift out of China to those third countries and some countries will replace the US in terms of exports to China (for example in agriculture). Just to give on example of the trend – according to AmCham China’s 2025 China Business Climate Survey Report (compiled from the responses of over 350 companies across 20+ different industries, with responses collected conducted from October 21 to November 15, 2024, spanning before and after the recent US Presidential Election), an increasing number of companies were already considering shifting production out of China, and that was before the additional pressure of exorbitant tariffs.

Defense Spending Prospects and Implications

President Trump’s policy changes haven’t just been seismic for global trade – his skepticism towards traditional US alliances  and calls for allies to ramp up contributions to defense have also marked significant policy shifts. One of the Administration’s biggest foreign policy pushes has been for both NATO and Asian allies to increase defense spending to 5% of GDP. The additional spending implied by this call are vast and economically significant – for perspective, the EU currently spends just 1.8% of GDP on defense. For Japan, the 2024 defense spending figure was 1.4% of GDP.

Just this past week, at the 2025 NATO conference, Trump secured allies pledge to more than double defense spending. And while Japanese leaders have said defense spending commitments should not be overly focused on a specific number, Japan too is ramping up defense spending as Japan’s pursues a five-year military buildup under the national security strategy adopted in 2022. These coming tsunamis in increased defense spending will be economically significant but the details matter – if the additional defense spending is largely funneled back into domestic economies, these policy changes have the potential to create significant growth upside, as well as provide a backstop for domestic manufacturing via support to and a build out of military-industrial capacity and domestic supply chains. It is worth noting that companies identified as sensitive to European and Japanese defense spending have significantly performed national indices since the US election.

Bloomberg

But the additional defense spending is also likely to further strain government finances and supply / demand balances for government duration debt, with additional government debt supply coming to the market, at the same time that central banks are stepping back as the marginal buyers of public government debt.

10yr Nominal Government Bond Yields

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Special Feature: Developed World Monetary Policy Scan

Major central banks have followed similar paths over recent years, both with respect to policy rates and their balance sheets.  Policy rates were cut to zero or below in the wake of the pandemic, and central banks also undertook a range of asset purchase programs that ballooned the size of their balance sheets relative to nominal GDP. As inflation surged over the period 2021 to 2023, central banks responded by raising policy rates.  Most recently, as inflation pressures receded, central banks had generally been in the process of gradually normalizing their policy rates and their balance sheets.  While this co-movement in central bank policy among the advanced economies has been notable over recent years, the uncertainty about trade policies among other factors has contributed to some divergence among the major central banks this year.

United States – On hold: Still-elevated inflation and solid economic performance have left the Federal Reserve holding rates constant this year as it awaits greater clarity about trade negotiations and the effects of tariffs on inflation.  The President and other members of the Administration have argued that inflation has continued to decline and that the Federal Reserve should be easing policy substantially like many other central banks.  With inflation running still somewhat above the FOMC’s 2 percent objective and the potential for tariff-induced inflation pressures later this year, the FOMC has elected to maintain its modestly restrictive policy stance for the time being.  Most observers do not expect to see further policy easing from the Fed until there is greater clarity on tariffs and the associated effects on inflation.

ECB, BoE, BoC, RBA – Easing into Disinflation: While the Federal Reserve has been on hold since the beginning of the year, the ECB has eased policy four times this year by a full percentage point, bringing the policy rate close to some estimates of the long-run “neutral” rate. Inflation in the Euro area has dropped close to the ECB’s target, and recent statements by ECB officials have noted the potential for trade policy and associated uncertainties to depress demand and put further downward pressure on inflation. Likewise, the Bank of Canada has eased its policy rate by 50 basis points this year.  At 2.75 percent, the policy rate in Canada is now appreciably below estimates of the long-run neutral rate reflecting perceptions that tariff uncertainties are weighing heavily on demand and contributing to downward pressure on inflation.  The Bank of England has eased its policy rate somewhat this year as well, but inflation in the U.K. has been elevated and the stance of policy remains restrictive.  At its May meeting, the Reserve Bank of Australia eased policy by 25 basis points reflecting the favorable trend in underlying inflation and downside risks to the real economy stemming from trade policy uncertainty.  Nonetheless, at 3.85 percent, the RBA’s policy rate remained somewhat restrictive.

BoJ- A cautious approach to tightening: In contrast to other major central banks, the BoJ tightened policy by 25 basis points this year, reflecting rising inflation pressures and a weaker yen.  Nonetheless, the BoJ has maintained an accommodative stance of policy even as inflation has run well above the BoJ’s 2 percent target over much of the period since 2022.  The cautious approach to policy firming reflects a view that inflation pressures are likely transitory and that underlying inflation has not yet reached the BoJ’s 2 percent target.

The ECB Policy Forum: This week, the ECB held its annual monetary policy forum in Sintra, Portugal.  A highlight of the conference included a moderated discussion with Christine Lagarde, Jerome Powell, Andrew Bailey, Kasuo Ueda, and Chang Yong Rhee—the heads of the ECB, Federal Reserve, Bank of England, Bank of Japan, and Bank of Korea, respectively.  All of the participants pointed to trade developments as a major factor shaping their views of the risks to the economic and policy outlook.  Chair Powell noted that the Federal Reserve anticipated some upward pressure on U.S. inflation later this year stemming from tariffs but nonetheless noted that many members of the FOMC judged that it could become appropriate to ease the stance of policy somewhat over the second half of the year.  President Lagarde observed that inflation in the Euro area had reached the ECB’s target but noted that trade policy uncertainties presented two-sided risks to the outlook for inflation.  Governor Rhee noted that Korea’s export-driven economy was quite vulnerable to trade disruptions and the looming July 9 deadline for the reimposition of tariffs was a significant risk factor for BoK policy.  Governor Ueda noted that underlying inflation in Japan was still running somewhat below the BoJ’s 2 percent target and adverse economic effects from tariffs presented a downside risk to the outlook for inflation.  Governor Bailey noted that although inflation had been running above target, there were signs of softening in aggregate demand that could feedback to the inflation outlook as well. All of the participants observed that the future path of policy was uncertain and would depend importantly on incoming economic data and its implications for the economic outlook.

The day before the ECB policy forum, the ECB announced the results of its assessment of monetary policy strategy. In her speech summarizing the assessment, President Lagarde noted that the ECB judged that supply shocks may be becoming more frequent and, in that context, “appropriately forceful or persistent monetary policy action” may be necessary to address upside inflation pressures.  She also noted scope for greater use of scenario analysis in public communications.  In the ECB policy forum panel, all of the participants agreed that scenario analysis played a useful role in informing internal deliberations regarding the appropriate path of policy but many also noted that using scenarios as a public communications device could be quite complicated.  Chair Powell noted that these and other issues related to Federal Reserve communications would likely be the subject of discussions at FOMC meetings in the fall of this year.

Balance sheet normalization:  While much of the focus on central banks has centered on actions related to policy rates, in the background, major central banks have continued to return the size of their balance sheets to levels consistent with their operating frameworks. The Federal Reserve slowed the pace of runoff of its securities holdings beginning in April; the move was partly related to technical factors associated with the debt limit but also some signs that reserves may be getting closer to “ample” levels.  The federal debt ceiling is a near-term wild card for the Federal Reserve’s balance sheet; at present, the level of reserves in the US has been boosted significantly by the debt-ceiling related reductions in the Treasury’s balance at the Federal Reserve.  When the debt ceiling is resolved, the level of reserves is likely to drop quickly by several hundred billion dollars as the Treasury replenishes its balance at the Federal Reserve.

Elsewhere, market participants have pointed to fiscal pressures and central bank balance sheet reduction efforts as contributing to upward moves of longer-term yields this year (see above), particularly in Japan, the UK and the Euro Area.  Partly in response to such concerns, the BoJ issued a statement this month indicating that it will slow balance sheet runoff.  The ratio of the BoJ’s balance sheet to nominal GDP exceeds 100 percent and that ratio has declined only marginally so far.  The BoJ holds about 50 percent of the outstanding stock of JGBs and has  indicated that it was prepared to step in to purchase JGBs in the event of a sharp rise in longer-term yields.

Both the ECB and the BoE are in the process of transitioning to so-called “demand driven” operational frameworks, a process that entails a significant reduction in their balance sheets and associated reserve levels. However, longer-term sovereign yields have risen significantly in the Euro Area and the UK this year, despite policy easing, and that is raising some questions about whether the pace of balance sheet normalization may be exacerbating upward pressure on rates from heavy debt issuance.  In the U.K., the Bank of England is scheduled to review its balance sheet runoff at its September meeting, and there is some market speculation that it could moderate or cease balance sheet runoff at that time.

Appendix: Below, we show for reference market action over various periods for major global asset markets.

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