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Inflation in the US is slowing down, how will this affect interest rates and the dollar?

The market expects the Fed to raise base rates by just 25 basis points.

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This will be a pivotal week for the global economy as the Federal Reserve Monetary Committee United States of America will evaluate the increase interest rate. The market expects a slight change due to the slowdown in inflation and the fall in the real estate market.
As you know, in 2022 inflation in the United States, it reached the level reached in 40 years, this caused a tightening of monetary policy aimed at raising interest rates to increase the cost of credit and the Federal Reserve Board’s currency board.

How did the rate hike affect the market?

Thanks to this systematic policy, the real estate market and retail sales show signs of weakness, and wage growth began to slow down, all parameters were taken into account fed whose current evolution suggests an increase in interest rates less than the last taken by the body.
“A slower pace of rate hikes will give the committee time to assess the full economic impact of monetary tightening,” said Madhavi Bokil, senior vice president at Moody’s Investors Service.

What do stakeholders expect from rate adjustments?

This week, the market expects the Fed to raise benchmark rates by just 25 basis points at the end of the meeting, which is a small rate hike for the second consecutive time.
Thus, the Fed’s reference interest rate will be between 4.50% and 4.75%, the last time this level was recorded in 2007.
In December, the Fed announced a 50 basis point hike, down from 0.75 percentage points in the previous four meetings.
The Fed doesn’t want to “continue to push until the economy goes into recession,” High Frequency Economics’ Rubila Farooqi told AFP.

Has inflation picked up in the US?

According to a Moody’s specialist, the decline inflation “far from winning” because consumer spending “continues to be flat” despite supply-side bottlenecks.
In addition, the same situation does not allow inflation to decline. Bokil explained to AFP that the labor market, with a historically low unemployment rate of 3.5%, needs to ease slightly for inflation to really come down and get closer to the Fed’s target.
The Federal Reserve is targeting 2% annual inflation, a level that is considered healthy for the economy. (AFP)

Source: RPP

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