Despite the recent market rally, economists are skeptical about investors’ optimistic bets that the global economy is set for a soft landing and interest rates are close to their peak, Financial Times reports.
Market Optimism Amid Declining Inflation: “In all the major regions we have this sense of light at the end of the tunnel,” said Claus Vistesen, chief eurozone economist at consultancy Pantheon Macroeconomics.
However, economists warn that central banks may struggle to bring inflation back to their 2% targets without raising rates to a level that could trigger job losses.
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Rate Hikes and Economic Resilience: Investors are betting that the Federal Reserve’s expected rate hike this week will be the peak in U.S. rates, with a loosening of policy anticipated in early 2024.
The Economists also cautioned that the lagged effects of higher interest rates could still lead to a significant economic slowdown.
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