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Markets betting that Federal Reserve will be able to avoid recession

The Federal Reserve began raising interest rates in March to tackle rampant inflation,  which was expected. However, when policymakers jacked rates by three-quarters of a percentage point in June it set off alarm bells that it would plunge the US economy into recession. 

Three more rate hikes of the same magnitude have only added to those fears and talk of doom and gloom has been the norm. But an analysis by Goldman Sachs shows that the mood is changing and investors are betting on the central bank pulling of a soft landing, avoiding a deep recession.

Fed Chair Jerome Powell signalled last month that while more increases would be coming, future ones could be smaller. Policymakers will meet this week to decide the path moving forward where they are expected to raise rates by half a percentage point. 

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