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Sunday, November 27, 2022

What rate ceiling do you anticipate?

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Xavier Timerman, managing partner of Adcap Financial Group, In his participation in the 14th symposium of the Argentine Institute of Finance Executives (IAEF), he highlighted that the current crisis in the US differs from previous ones due to the strong impact it is having on the capital market. This factor creates uncertainty about what direction the Fed will take in 2023.”


“What is currently happening in the United States makes it difficult to predict what is going to happen. It is not a typical crisis, like in 1982, where economically it was a depression, but it was a positive moment for the markets because the rate was beginning to drop and the economy was beginning to motorize. Nor is it similar to the 2008 crisis, which despite having been catastrophic because it put the US financial system in jeopardy, a bond portfolio rose 25%, and at least there was that possibility of investment. Today, a model portfolio made up of 60% stocks and 40% bonds is down 23%, and added to 7% inflation, the average American is 30% poorer,” Timerman said.

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In this sense, Timerman considered that the Fed was not prepared to face this inflationary spiral that the economy is going through and that it took her completely by surprise. “The shock caused by the covid combined with the lax policy of zero rates that he maintained for many years left them in a bad light. What demonstrates the intention to take a hard speech for granted are the speeches of the Governors that we see daily, something that did not happen before. Thus, In my opinion, they are going to maintain the aggressive discourse of raising ratesBecause they feel a lot of pressure from critics, but inflation will subside, so I don’t think it’s necessary to raise rates above 5%.”

As for the financial outlook for Argentina, Timerman highlighted that the adverse context for risky assets will continue: “The drastic rise in rates and the unusual rate of inflation for modern capital markets created a lot of opportunities. Funds are looking at assets in so many markets, a situation that has never happened more frequently. This makes investors choose companies abroad such as Petrobras or Pemex, which are known to pay and have a good rate. So, unfortunately, this scenario makes it more difficult for Argentina to insert itself back into the global investment circuit.”

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Source: Ambito

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