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World’s most aggressive rate tightening cycle nears end – JPMorgan

The most aggressive cycle of tightening interest rates by global central banks is coming to an end, according to a group of strategists at JPMorgan Chase & Co (NYSE:JPM).

A shift in European Central Bank (ECB) tone, easing UK financial sector uncertainty and slowing rate hikes in Canada and Australia raise hope that the tightening cycle could end by early 2023, says Marko Kolanovic, chief global strategist at JPMorgan .

The US Federal Reserve System (FRS) is likely to raise key rates by 50 basis points in December and take a break after another increase – by 25 basis points – in the first quarter of next year, experts believe.

However, they warn that the slowdown in monetary tightening does not mean that central bankers will stop fighting inflation. Price pressure must continue to decline for this to happen, experts say.

The ECB has signaled that it has made some progress against record inflation after key rates doubled. Meanwhile, the head of the Federal Reserve Bank (FRB) of San Francisco, Mary Daly, said that the US Central Bank should start discussing the issue of slowing down the pace of raising the base interest rate.

“If our forecast is correct, the world’s most synchronized and aggressive rate hike cycle in 40 years will end by early next year,” JPMorgan strategists wrote.

“An important support for risky markets comes from signals that the pace of monetary tightening by central banks has peaked and that further rate hikes are likely to be on a smaller scale,” they said.

Markets are waiting for the results of the two-day Fed meeting, which will be summed up on Wednesday. Traders are confident that the US Central Bank will raise the base interest rate by 75 basis points (bp) following the results of the fourth meeting in a row. As a result, the rate will reach the level of 3.75-4% – the maximum since December 2007.

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Traders will be closely watching Fed Chairman Jerome Powell’s statements to see if the US central bank intends to slow down the pace of policy tightening from December, writes the Financial Times newspaper.

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