The US Fed is unlikely to hike interest rates any further, but rate cuts will have to wait till the mid of next year, even as inflation cools off, Mark Matthews, Head of Research, Asia for Julius Baer said in an exclusive interview with Moneycontrol.
The markets appear to have decided that the chances of a rate hike are extremely low, said Mathews. The last time the Fed hiked its rates was in July 2023. With the backing of a strong US economy, Matthews believes that it is unlikely that there will be a rate cut for many months. Over the last one year, the Fed rates have increased from 3 percent in October 2022 to 5 percent in September 2023.
The average gap between the last rate hike of hike cycles and the first rate cut of cut cycles, he says, has been around ten months. According to him, one could expect to see a similar trend this time too. The next round of Fed meetings are expected to be held in September and November this year.
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The latest CPI data, released on September 13, also showed no surprises. According to the data, rising gasoline prices were responsible for the rise in the inflation headline. Additionally, the core CPI modestly decelerated over July. This was in part due to rental prices. “If we look at the real-time rental indices, they have come down a lot. So we can be quite sure that will continue to drive the core down. Property or ‘shelter’ is 40% of the core CPI. That is the number that the Fed really focuses on,” Matthew said.
Matthews further said that he continues to see the US dollar as a good currency to own but does not expect its value to continue rising “because by the looks of it, Chinese and the Japanese don't want to see their currencies go down much more." He has a more stable view where he neither sees it rise much more or as an extreme collapse in the coming days.
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