Economists expect the Fed to raise interest rates again this year, while the negative impacts of restrictive policy would be felt next year.
Economic analysts around the world have an eye on what is happening in USA, due to the great weight that this country has in the world economy. Uruguay is no exception, and has already taken measures to protect itself against a possible recession in the power.
Economists consulted by Bloomberg agree on one point: the US economy has a more optimistic outlook in the future, and greater growth is expected for the third quarter than previously projected: 3% against the original 1.8%. The other side of the coin is that inflation remains high and it is expected to continue to be so, at least in the medium term.
He oil price increase It is a worrying factor in this sense, since it predicts an even more complex scenario in terms of inflation control policies and their final effectiveness. Meanwhile, the forecast is that the price index of personal consumption expenditures —the index that most looks at Federal Reserve (Fed) when making decisions about monetary policy—will continue to accelerate in the remainder of the year.
In short, and taking into account this context, 2023 can expect a new rise in reference interest rates of USA; at the same time that 2024 will have less cuts than those previously projected. And this, according to the belief of most of the economists consulted, can lead to a recession.
The prognosis, however, is not so fatalistic, and the worst scenario postulates a “mild recession” by the first half of 2024. This is because businesses and consumers will increasingly be negatively affected by high interest rates. Likewise, among economists they still maintain a 55% chance of recession in USA in the next 12 months — although it is the lowest figure in a year.
Is Uruguay prepared for a recession in the United States?
Uruguay It has a dollarized economy so, as happens in many countries in the world, a recession in USA It could mean major problems at the local level. For this reason, the Central Bank of Uruguay (BCU) For months now, it has been analyzing the possible scenarios for the American economic future; among them, that of the contraction of the economy.
In July it raised the countercyclical capital buffer; that is, the capital necessary to overcome an eventual crisis, in this case, caused by a crash of one of the most important systems in the world. In this way, this reserve will be a 0.75% higher from 2024in line with the period where the greatest negative impacts of rate increases on the US economy are expected.
Certainly, the current projections are less pessimistic than in the middle of the year, when the BCU identified the future of the United States as one of the greatest risks for the local economy — thus recorded in the Report on the Countercyclical Capital Buffer in Uruguay—; But even a “mild recession” could seriously affect the partially dollarized credit market that the country has, so the measures taken by the national monetary authority were a good read in the short and medium term to prevent much more complex situations.
Source: Ambito
