Major central banks are saying no to further rate hikes

The street has started making long-term bearish bets for the US Dollar as Federal Reserve chair Jerome Powell delivered signs of concluding the year-long rate-hiking spree to avoid any further mess in the banking crisis. Also, rates have reached a point where room for further escalation is less. Like the Federal Reserve, other central banks are also eyeing a pause in the rate-hiking cycle such as the Bank of England, and the Reserve Bank of Australia (RBA). Above all, the Bank of Canada (BoC) has already paused its policy-tightening cycle, citing that current monetary policy is restrictive enough to tame price pressures. So, it would not be justified to corner the US Dollar for concluding the tightening spell.

US Inflation to be hammered by Fed rates and banks' credit tightening

The US inflation has been in a declining trend for the past few months as the Federal Reserve has pushed rates significantly to 4.75-5.00% after eight consecutive rate hikes. Room for further rate hikes looks small as Federal Reserve Powell has confirmed only one rate hike for now but a big no to consideration of rate cuts this year. Therefore, higher rates for a longer period by the Federal Reserve would continue to weigh on inflationary pressures.

Apart from that, US banks are likely to be more precautionary while disbursing loans to households and businesses, which would impact the overall demand, inflation, and the scale of economic activities.