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breaking news The Fed Debate Could Stop at 5% But It Won’t End


The Fed peddled a wonderful story:

Rates will rise somewhere in the 4.75-5.25% range and then flatten, possibly for all of 2023. Despite this, the economy will be heading for a soft landing with a recession largely avoided. Then, inflation will slowly come back towards the target in 2024 and rates will return to the 3% range.

History shows that such results are rare.

Last week Deutsche Bank released a good chart of Fed rate hike cycles and how history shows it often takes a long time before rates are cut and in some cycles it need a second round of hikes – perhaps at an aggressive pace – to bring inflation under control.

I can see the case for almost every scenario right now. Consumers still seem pumped up and there are no big cracks in the job market. Overall, demographics could keep the labor market tight and green transition spending will be inflationary. Against all of this is a 30-year history of contained inflation due to globalization and entrenched expectations; it’s too early to say it’s done or reversed.

However, in terms of trading, the next year will be marked by a harder landing, stubborn inflation or both. It will be a difficult environment to navigate.

This article was written by Adam Button on forexlive.com.


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