41-Year High US Inflation Shall Even Nudge The Fed To Go For Rate Cut Sooner Than Expected: Report

The skyrocketing inflation levels in the US which came in at 9.1%, its almost over 41-year high has dented investor sentiment. Post this what investors discounted is a rather steep rate hike as against earlier expected of even 100 bps in the upcoming policy meet scheduled for July 26-27, taking the rates to 2.5-2.75%.

The data however was not taken in due heed as Joe Biden-the US President said the softening of the fuel prices has not been discounted in the latest data.

That said, there is a view that the upcoming rate hikes shall not only impact the US economy, but the world over economy also as US imports shall be impacted in case the US meets recessionary fate.

"Aggressive Fed (interest rate hikes) will push us into recession by year end," said famed hedge fund manager Bill Ackman on twitter who is quoted as saying in a leading business portal.

So, while rate hike is expected all through the year, that should be followed by some stability in 2023 and then probably a rate cut in 2024. Given the current market stance and dynamics, there is also hailed a view that the Fed shall yield in to rate cuts as early as March 2023.

"The market appears to assume that the Fed will act as it did in the last three recessions by immediately easing when the economy goes into recession," Ackman said.

So, as there is seen a recovery in the US markets after a decline by over 2% and the cheerfulness in Asian markets after an abrupt lacklustre underlines that the market is expecting the Fed to release its sword against inflation sooner than it would.

Nonetheless, the entirety of rate hike trajectory going forward shall to a larger extent depend on how inflation pans out going forward.