Is the Fed changing the rules?

This week on Bondcast, Imogen Bachra, Oriane Parmentier and Stuart Sparks unpack the key macro themes dominating fixed income markets following NatWest’s Official Institutions Conference in Edinburgh. With geopolitical tensions in the Middle East continuing to drive market volatility, the discussion shifts beyond the headlines to explore how investors are thinking about inflation, growth, central bank reaction functions and fiscal risks across the US, Euro area and UK.

Key themes discussed

US: Affordability versus inflation

Stuart outlines NatWest’s view that the Fed could increasingly focus on growth and real incomes rather than maintaining a rigid 2% inflation target. The team discusses whether higher inflation tolerance may become a feature – rather than a failure – of future policy.

Europe: Conditional ECB and structural steepening

Oriane discusses why the ECB’s tightening cycle may become increasingly data dependent, and why long-term funding pressures linked to defence, AI and energy transition spending could support steeper curves across Europe.

UK: Inflation persistence and fiscal risk 

Imogen explains why the UK faces a uniquely challenging combination of sticky inflation, aggressive QT and elevated fiscal sensitivity. The conversation also explores why political uncertainty continues to matter disproportionately for gilt markets.

This episode was recorded on 28 May 2026.

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