Dollar, inflation and rates 2023: JPMorgan’s predictions for investors

Of the above, the decisions of the Federal Reserve (FED) stand out, whose increase in interest rates in 2022 were the most aggressive in 40 years. However, I over what will happen in 2023?: JP Morgan estimates suggest that, although interest rate adjustments have occurred due to the increase in inflation, It is probable that this year the Central Bank of the United States will take less aggressive measures.

“Inflation remains well above the central bank’s targets, but we are noticing a subtle shift in monetary policy. The Fed is likely to do the same to assess the effects of its tightening cycle: Higher rates hit the economy with a lag. The rate increase campaigns are likely to come to an end in 2023, ″ he indicates.

Interest rates

JPMorgan warns that the historical rate of interest rate increases, not only in the United States, but in countries in general “it has already posed serious risks to global economic growth”; Therefore, the probabilities of a recession are undeniable and that this scenario that is envisioned for this year that has just begun, will lead the central banks to stop raising rates, because a drop in inflation is estimated.

“Several Fed governors have called for a pause in rate increases in the first quarter of 2023, concerned that they may go too far in their efforts to control inflation,” says the financial institution, which also stresses that interest rates Higher interest rates are intended to slow down the economy in part by discouraging businesses and households from borrowing and that precisely the measures that were adopted in 2022, “so far, are doing just that.”

Dollar

Another aspect that JP Morgan draws attention to is how these macroeconomic circumstances impacted the behavior of the dollar. In this regard, he stated that a strong dollar “adds another source of resistance to global economic activity.” In addition, increased volatility in the capital markets “could reduce business confidence and discourage investment and hiring plans.”

Although it is not “certainly” known when and at what rate inflation will begin to decline, What JP Morgan does estimate, based on projections of lower economic growth for this year, is that this “will lead to the end of the world cycle of rate increases in 2023.” And while this might appear at first glance to be good news for investors and markets, he cautions that “historical evidence suggests that the real economy takes the most damage after interest rates have already risen.”