According to analysts from Blackrock, the Federal Reserve will have to change its policy in order to start cutting interest rates.

The asset manager said in a report Monday that a soft landing, where the central bank raises rates without sinking growth, will not be possible.

Slowing down demand is one of the effects of rising interest rates. Today's inflation regime is due to supply-chain issues and labor shortages, rather than demand side issues, according to analysts.

"We believe that the Fed and the European Central Bank will eventually choose growth over inflation." They will not have slammed demand all the way down to meet the low level of productive capacity.

The Fed is expected to change course later this year as Europe slides into a recession, as evidenced by the half-percentage point rate hike issued by the European Central Bank in July.

Our bottom line? We expect more volatility so we focus on positioning. Because central banks appear to overtighten policy, we are underweight developed market equities. Once central banks shift to a more moderate path for rates, we will switch back to overweight.