FOMC meeting: acceleration in the pace of monetary stimulus removal, but the Fed is still hoping in an “almost soft” landing. The Fed hiked rates by 50bps and announced its balance sheet reduction plan, which will be implemented starting at the beginning of June. The Committee envisages 50bps hikes at the next couple of meetings as well, but it is not considering larger hikes. The FOMC has committed to bringing inflation back under control, cooling demand, but outlined a very benign baseline scenario, with expectations for a non-traumatic adjustment. In our view, easing price pressures and wages could call for rates of close to 4%, or in any case in restrictive territory, resulting in a significant slowdown of growth in 2023-24.
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