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Fed’s Waller(typically dovish): can “no longer rule out” hikes;US bond sell offreflects stronger US economic data, not investor selling flows; Why the Britishare leaving for Australia? *** DB podcast: Matt Raskin and Matt Luzzettiask whether the Fed could hike in2026?20minutes,here. US equities werestrongerFriday,S&P up 0.4%,but still 0.4% below the recordhigh reached on 14 May.US10yr yields down 1bp to 4.56%.Bigger declines inEurope: UK 10yr yields down 7bps(and ~30bps over the week), Germany down6bps.Oil up 0.9% to USD103.54/bbl (Brent). Michigan consumer sentiment revised down3.4ptsin final read for May,to 44.8.Historic low.One-year ahead inflationexpectationsrevised up 0.3ppts to 4.8%(and up from 3.4% in February pre Iran shock),while5-10yr ahead inflationexpectations wererevised up 0.5ppts to 3.9%.The spike inthese measuresisconsistent with other signs thatUSinflation expectations aretrackinghigher,problematic for the Fed. Hawkish fromFed’s Waller(who is typically dovish): Doesn’t think Fed should“consider” hikes in “near future”, but also: a rate cut is“no more likely than a hike”as Fed’s next move. Inflation will be the “driving force” in policy decisions ahead.“I can no longer rule out rate hikes further down the road if inflation does not abatesoon.” Japan CPI missed,headlineup 1.4%yoy in April, consensus at 1.6%.Core at1.4%,consensus at 1.7% and core-core at 1.9%, consensus at 2.2%.Despite the miss,Ken Koyamaexpectsinflation to accelerate from here,but also thinks the missreduces the probability of a rate hike in June. Did Fed rate cuts overinsure for downside labour market risks?Matt Luzzettinotesthatthe Fed delivered 175bps of rate cuts even as inflation has remainedwell above target, framing the last roundof cutsas “insurance” in response toelevated downside labour market risks.Relative to a set of standard policy rules,the first set of cuts in 2024 was appropriate. But following the second set lastyear,and the recent acceleration of inflation,the fed funds rate is nowsignificantly below all policy rule settings.Fed policy may therefore have becomeoverinsured against downside risks to the labour market, and prospects for futurehikes might best be interpreted as a prudent reversal of this insurance. Steven Zengreviewsthe time zone decomposition of the recent rise in US yields.The selloff in US rates since late April has occurred mostly during New Yorkmorning hours, consistent with the market repricing to stronger economic data.The correlation between 10yr yields and data surprise indices has strengthened 25 May 2026DBDaily duringthis period,another sign that the latest backup in yields reflectsmacroeconomic repricing rather than investor selling flows. The population of British nationals aged 20 to 29 resident in Australia grew by40% between Jun-21 and Jun-25.Over 79,000 Brits were granted AustralianWorking Holiday Maker visas in the year ending June 2025, up from around20,000 the prior year.Sanjay Rajathinksthis reflectsa stagnation in UK livingstandards,but alsoargues that demographics are destiny.The pace at which theUK can re-attract or retain its young will be one of the more important signals onwhether the country's growth story is genuinely improving. The exodus could havefurther to run. Sebastian BeckerthinksGermany’s general government deficit mightbe around4.1% of GDP in 2026.This reflectsthe structural rise in federal spending (despitepotential target misses for defense and investment) and anticipated deficits atother government levels (states, municipalities, social security funds).Italsoreflectsa weaker growth outlookkeepingthe cyclical deficit high. The weekaheadfrom DB’s globalanalysts Inflation reports will be the datahighlightthis week. US prints core PCE deflatorfor April,European preliminary data for May, Tokyo CPI for May and Australia CPIfor April.RBNZ policy decision is also due. US,core PCEfor Aprilthe highlight. DB looks for a 0.28%mom print. Europe,flash CPI for May, retail sales for April, ECB minutes UK,surveys,BoEspeak Japan,service producer prices, Tokyo CPI, IPand consumer confidence. Uedaspeech Australia/New Zealand; Australia CPI, first-ever speech by RBAboardexternalmember; RBNZ to stay on hold, but also stay hawkish The day ahead Quiet day ahead,US closed formemorial day 25 May 2026DBDaily 25 May 2026DBDaily Appendix 1 Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned leadanalyst(s). Inaddition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specificrecommendation or view in this report. Phil Odonaghoe. Important Disclosures Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from localexchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subjectcompanies, and other sources. For further information regarding disclosures rele