The Fed is almost certain to hike its policy rate by 25bp to between 5.25% and 5.50% at next week’s FOMC meeting, but we increasingly believe that will prove to be the peak. Despite the ‘higher for longer’ rhetoric from officials, a more marked decline in core inflation and easing in labour market conditions in the second half of this year will eventually persuade the Fed to pivot and cut rates aggressively next year.
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