The US Federal Reserve’s preferred measure of inflation is expected to send mixed signals Friday, forcing monetary policymakers to contend with a monthly but an unchanged and robust annual rate.

An economists’ poll forecasts the US Commerce Department’s core PCE deflator for February to ease to a monthly rate of 0.4% from 0.6%, with the annual rate expected to hold at 4.8%. But not everyone is party to the consensus. “Both total and core PCE inflation are also likely to moderate in February in line with the CPI prints,” HSBC said.

US headline annual consumer price growth fell for the eighth straight month in February, dropping to 6.0% from 6.4% in the prior month, according to US Labor Department data. The monthly rate slipped to 0.4% from 0.5% in January.

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The sharpest rally for U.S. government debt in years has left investors and analysts warning that bond markets are vulnerable to a reversal.

Prices for Treasurys leapt after turmoil in the financial sector drove investors to lower their expectations for how high the Federal Reserve would raise interest rates. Now, some worry that with banks stabilizing, a resumption of the Fed’s inflation-fighting efforts could spark declines as rapid as the rally.

A fresh bond selloff could mean bad news for stocks, which have managed to eke out gains through three turbulent months of trading so far this year. The S&P 500 has risen 5.5% through Thursday, a climb likely jeopardized if yields rise again, said Keith Lerner, co-chief investment officer at Truist Advisory Services. Higher Treasury yields give investors a lower-risk way to lock in returns.

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Headline inflation in the Eurozone fell sharply in March likely bringing some welcome relief for households but a rise in the core rate offers little succour for European Central Bank policymakers.

Preliminary data from the EU statistics office Eurostat showed a sharp drop in Eurozone annual inflation last month to 6.9% versus the market estimate of 7.1% and the February reading of 8.5%.

While there was a softening in the headline rate. The core reading excluding energy, food, alcohol, and tobacco rose a tenth to 5.7%, in line with the consensus. Food inflation grew to 15.4%, a new record high.

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Euro zone lenders have so far weathered the financial storms blowing in from the United States and Switzerland. That has allowed the European Central Bank to keep raising rates to combat inflation. President Christine Lagarde’s job, however, is about to get harder.

June 28 is a pivotal date on the European banking calendar. On that day, lenders must repay 549 billion euros they borrowed from the ECB’s targeted longer-term refinancing operations (TLTROs) three years ago, during the pandemic.

On the face of it, this should be welcome news for the ECB. The bank is already shrinking its balance sheet by letting its bond portfolios mature. Those TLTROs were made with very favourable interest rates of around minus 1%, making them an anachronism in an era of tighter policy. The ECB once estimated the loans drove down lending rates by as much as 60 basis points, equivalent to a big rate cut.

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