Fynsa
Core inflation is leaning in a more comfortable direction, so it would be reasonable to conclude that the Fed could adopt a wait-and-see approach at its next meeting, effectively ending the tightening cycle.
Of concern is what is happening with core inflation, which rose 1.6% in March.
Our biggest question mark is that a soft landing scenario is already largely built into prices and we don't see much reason for risk assets to continue to rise, amid higher rates and still hawkish language from several FOMC members.
Although the Fed is nearing the end of its rate hike cycle, they are still likely to raise the fed funds rate further, given the strength of the labor market, but keeping the pace moderate.
The Central Bank decided to keep the rate at 11.25. The question now is when there will be news on this front.
Higher interest rates put pressure on valuations during 2022, but the focus will now shift from valuations to corporate earnings in an increasingly challenging macro environment.
The central bank will consider factors other than inflation for its monetary policy, such as the current account deficit, financial conditions and international trade.
Most baseline scenarios for 2023 assume either a soft landing or a mild recession, under the assumption that inflation will decelerate significantly and that the terminal policy rate would be in the range of 5.0% - 5.25%.
