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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