IT FELT like stocks were heading for a euphoric melt-up this past week, even as the major central banks pushed interest rates higher and United States employment data came in stronger than expected. The reason? US inflation now appears to be subsiding without much economic fallout.

“We can now say, I think for the first time, that the disinflationary process has started,” said US Federal Reserve chairman Jerome Powell, during a press conference on Wednesday (Feb 1), after announcing a 25-basis-point hike in the federal funds rate to 4.5-4.75 per cent.

Powell said much of the disinflation so far has been driven by lower goods prices, as a result of softer demand and easing supply chain bottlenecks. He also expressed confidence that inflation in the housing sector will come down in the months ahead.