Along these lines, the FOMC indicated: “Recent spending and production indicators have softened. However, job creation has been strong in recent months and the unemployment rate has remained low. Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising food and energy prices, and broader price pressures.”
This is the fourth consecutive rise in the agency’s rates: 25 basis points in March, 50 points in May, and 75 points in June, until then the largest increase since 1994. At that time, annual inflation was 2.7 %, while last June it stood at 9.1%.
In a press conference, the president of the Fed, Jerome Powell, denied that the US economy is in recession. “Monthly payroll growth has recently averaged 450,000 jobs and employers added 2.7 million jobs in the first half,” he said. In addition, he assured that 2021 had an “exceptionally high” growth of 5.5%, so they expected it to slow down.
Still, Powell admitted that “we have seen the beginnings of a slight decline in the adjusted labor market, although the rise in initial jobless claims may actually be seasonally adjusted.” The figures of the evolution of the GDP will be informed this Thursday. After the drop in activity in the first quarter, a new drop in the second could indicate that the country is in recession.Impact on the dollar and emerging markets
The dollar rose immediately after the Fed’s statement, but in a short time it changed its trend, and went on to trade in the red. The dollar index fell 0.093% to 107.020 points, and the euro was up 0.29% at $1.0143. Bets on too high interest rates helped the dollar index hit a two-decade high of 109.29 earlier this month, but the greenback has weakened of late as economic data has hinted at a possible recession.
The euro recovered part of the previous session’s decline, which was the currency’s biggest daily percentage drop in two weeks on fears of a European recession, after Russia again curbed gas supplies to Europe through the Nord pipeline. Stream 1. The Japanese yen was down 0.07% against the greenback at $137.04 per dollar, while the British pound was trading up 0.34% at $1.2066.
As for the impact on the currency in emerging countries such as Argentina, the news from the Fed will cause less capital inflows to these economies, due to the so-called “flight-to-quality” effect, where investors move towards safer assets.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
