The rates lower worldwide in the US

The rates lower worldwide in the US

February 3, 2025 – 00:00

The Federal Reserve, after three cuts in the last three conclaves, maintained the rate without changes at 4.50%. But if the commercial war goes seriously, they will have to go up.

The first monetary policy meeting of the new era culminated Trump. And the Fed, After three cuts in the last three conclaves, he kept the rate without changes at 4.50%. He confirmed what was already known. In the final stretch of management BidenThe central bank adjusted its strategy rapidly. And transformed it into a “easy trigger” case: a 100 -dotted reduction in three months. But, on December 18 he canceled the commands and retired to winter barracks. And now he expects the brand new administration to display his letters. Generalized and significantly higher tariffs (several times its average level), mass deportations, and tax reductions are publicized ingredients of the powerful cocktail that Donald Trump promotes. They are nuanced with stimulus promises to the supply of energy, pruning public spending and a thriving wave deregulating. The Fed trusts the replication of inheritance inflation -from there, the rate cuts of 2024 -but reserves the trial on the real caliber of the Trumponomics. That inflation (PCE) has increased just 0.16% in December is very good news. However, that inertial dynamic aims to become history, which was led Biden and Trump to hate and intend to alter.

It is a blur time and new account. It is the aggressive changes that drive the brand new administration that must be monitored. Therefore, the current approach of Powell And company is “see and wait” with crossed arms. The president fervently wants (always) that the rates fall, but also wants to address a commercial war on a larger scale than in his first mandate. And although Trump denies it, inflation could be one of the first victims of crossfire, which places the defensive Fed, but already stepped on long rates. A complete point since September.

If Trump’s enigma is a reason for the Fed to suspend the relaxation process, outside the US, it encourages the opposite phenomenon: a faster reduction in monetary policy rates. Canada and the European Central Bank (ECB) produced losses the week that passed. The Bank of England has a turn for Thursday. Trump revole threats to piecework, and no economy has a walk as solid as that of the US to absorb a show like this. Spinning financial conditions in advance is a timely recipe for G10 countries (former Japan) and China even when they don’t know what the tycoon brings between hands. And the differential of interest rates that widen fires firewood with a strong appreciation of the dollar in the world.

If the commercial war is serious, and it will not be inflationary in the US, it will be a war of coins. And the dollar will rise a tremendous mandoble on the table. And there the central banks, all, will have to recalculate their policies and rates with an eye back in coordination and financial stability. The silhouette of a new Plaza-such as that of 1985 that allowed Ronald Reagan’s Super-Dollar-to outline the horizon. But, for now, Trump plays the lonely. He frowns, looks in the mirror, and swears that will proceed without contemplations.

“The most silly commercial war in the world is coming,” title The Wall Street Journal. The president, on the edge of the Friday, said that the rise of tariffs was already determined and there was nothing that Canada, Mexico and China could do to stop it. The official rhetoric was lit. Imports of chips, steel, aluminum, copper, pharmaceutical products, oil and gas will also be taxed. And there will be “a substantial action” against the European Union. It was also said, in a different issue, but that arouses similar level of disbelief, that the idea of ​​buying Greenland is not a joke and that control of the Panama Canal will be resumed. As to banish doubts, it clarified: the administration knows that all this will cause a disruption in the markets, but the same will advance. On Saturday the first concrete measures were lit. Canada and Mexico will pay 25% taxes. To the devil the USMCA. The markets, on Friday, still quoted this reality as a “Bluff.” Nothing very different from the treatment that was given to the appearance of Deepseek in the field of artificial intelligence, of course without the strong initial cimbronazo. Trump warned them and did not believe him. It will touch up today.

Deepseek is an uninflationary phenomenon, the commercial war is a crusade totally contrary. Can the Central Bank look at the epic without intervening? The good news is that, at the end of the day, inflation will depend on the Fed and not on commercial policy. But Jay Powell can’t disregard. If Trump does not get the “Deal” that he looks for so much and the tariff Pax is not restored, we must load the weapons again. The case will not reach with the voice of communication. Nor with the stir of long rates and coins. As in 2022, short rates will have to be raised so that price increases do not unleash inflation expectations, which are the firm anchor of the system that neither the disruption of the COVID could release.

Source: Ambito

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