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RoboForex - www.roboforex.com
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[QUOTE="Vlad RF, post: 215207, member: 61796"] [B][SIZE=5]Is the Interest Rate Growth Cycle Coming to an End?[/SIZE][/B] [CENTER][img]https://blog.roboforex.com/wp-content/uploads/2022/11/23.11.2022-1536x662.jpg[/img] [B]Dear Clients and Partners,[/B][/CENTER] Market participants expect that the US Federal Reserve (Fed) monetary policy tightening cycle is coming to an end. The US inflation rate eased to 7.7% in October, further strengthening the belief that the regulator's head, Jerome Powell, will soften his rhetoric. Against this background, the S&P 500 index (US500) is up 15% in two months. Is there really any reason for optimism? In this article, we will try to analyse what is happening to the US economy now, what parameters Mr. Powell is focusing on, why the inflation rate fell in October, and whether there is a chance that this dynamic will continue in the future. [SIZE=5]What parameters does Jerome Powell monitor?[/SIZE] After the COVID-19 pandemic crisis, we saw a sharp rise in inflation. At the time, many investors were saying that it was time to raise the interest rate, otherwise, it would not be possible to control inflation with monetary means. In his speeches, Jerome Powell said that inflation is temporary, there is no need to rush to tighten the monetary policy, and the interest rate hike will start after unemployment has fallen to 2019 levels. In March 2022, the unemployment rate fell to 3.8% in line with pre-crisis levels, and the Fed started a cycle of interest rate hikes already in April. [img]https://blog.roboforex.com/wp-content/uploads/2022/11/FRS.png[/img] Many market participants are now wondering when the Fed will bring its monetary policy tightening cycle to an end. On 3 November, Jerome Powell said: "Before rates peak, we need to see a sustained decline in inflation and a series of declining monthly figures will be good evidence of that. Continued rate hikes will be needed to have a sufficiently restrictive effect on the economy and bring inflation back to the Fed's 2% target." This means that one month's data would not change anything, while all the attention of the head of the regulatory body is currently not on the labour market, but on the inflation rate. [SIZE=5]Has the US economy suffered from the Fed’s actions?[/SIZE] A further interest rate hike could bring down the US economy – this is the view increasingly being relayed by the media. If we look at the rate increase, it has risen from 0.25% to 4% in 7 months. Such an increase was only seen in the 1970s during the economic crisis, which was accompanied by high inflation. The first thing we will look at when seeking to find out whether the US economy has been hurt by the Fed's actions is the labour market. Yes, large companies – like Meta Platforms Inc. (NASDAQ: META), Tesla Inc. (NASDAQ: TSLA), and Snap Inc. (NYSE: SNAP) – have reported layoffs, but if we take a look at the number of layoffs in the country, we can see that the figure has been declining since 2021. [URL="https://blog.roboforex.com/blog/2022/11/23/is-the-interest-rate-growth-cycle-coming-to-an-end/?utm_source=earnforex.com&utm_medium=cpc&utm_campaign=rf_en_external_forums_blog&utm_content=text&a=ohrb"]Read more at R Blog - RoboForex[/URL] [B]Sincerely, RoboForex team[/B] [/QUOTE]
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