Joaquin Candia, Portfolio Manager at Toronto Trust, He pointed out that “the market consensus is that the monetary authority would raise the rate 25 basis points, leaving it at levels of 4.75%.” In that line, from balance They highlighted that “the market projects a somewhat more benign trajectory for the monetary policy rate than the estimate of the members of the Fed in December.”
“Lower-than-expected inflation since October and some activity indicators showing less dynamism than projected led the market to incorporate cuts even in 2023. We are of the idea that the monetary policy rate will remain at 5% during 2023 and just the Fed will reduce its policy rate in 2024. Taking into account that the opening of China could put pressure on the prices of the commodities, inflationary convergence could begin to be threatened again in the coming months, so we see room for this to be incorporated into asset prices and, therefore, financial conditions to deteriorate again”, they expanded from that stock company.
“The Federal Reserve will most likely slow the pace of policy rate hikes to 25 basis points. The economic data seems to be reflecting the impact of the monetary adjustment and the comments of the Fed officials themselves point in that direction. However, as in December, we hope that the statement sends signals of a restrictive monetary policy for a long time” they pointed out from Balanz.
For his part, John Troncoso, manager at Fifth Investments He stated: “Currently the market is pricing too optimistically. Inflation will probably continue to slow progressively but I don’t think the rate will start to decline in six months, as the Fed futures predict. It is worth noting that the world continues to go through a change in supply chains due to war, that will condition investment decisions for decades.”
Impact on emerging
Juan Alra, Portfolio Manager at Southern Trust TPCG GROUP, remarked that “the increase in Fed rates has externalities in the rest of the world, especially in emerging countries through the financial channel and through the commercial channel.”
In this regard, he expanded: “The possible appreciation of the dollar would make imported items more expensive and could generate a drop in commodities worldwide, which would make it difficult to have the trade balance at current levels since we have practically all exports linked to the agriculture (21.1% agricultural raw materials plus 38.9% manufacturing of agricultural origin). Added to this scenario is the drought in Argentina. This implies that dollars are going to be scarcer. This increases the cost of accumulating reserves in order to meet IMF targets. On the financial side, assets in dollars would be more attractive and would cause an outflow of funds from emerging countries to developed ones, but deepened in our case by the restrictions that Argentina has to finance itself in the world market”.
“The Argentine panorama could be favored if China re-entered the scene, increasing the demand for commodities, especially those related to agriculture. However, it could unleash inflation that is even more difficult to control in the first world,” Alra added.
Source: Ambito
