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    Published on Thursday, June 22, 2023

    Mexico | The end of the Fed hiking cycle is near

    Summary

    In its most recent decision, the Fed did not change the monetary policy rate, keeping it between 5% and 5.25%. This after ten consecutive increases in the steepest hiking cycle in the last fifty years.

    Key points

    • Key points:
    • However, the Fed has clarified that the hike cycle is not over. I think the Fed will raise the policy rate once more in July to a 5.25-5.5% range, reaching the terminal level of the current tightening cycle.
    • Bringing inflation to 3% will be a relatively inertial process. But lowering it from 3% to 2% will be very difficult if the job market remains tight. For this reason, I believe that starting in July, the Fed will keep rates at high levels for a prolonged period, eventually increasing the unemployment rate and possibly creating a recession.

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    Topics

    Authors

    Carlos Serrano BBVA Research - Chief Economist

    Documents and files

    Press article (PDF)

    ArtPrensa_CarlosSerrano_22Junio23.pdf

    Spanish - June 22, 2023

    Press article (PDF)

    PressArt_CarlosSerrano_22June23.pdf

    English - June 22, 2023

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