He Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) of the USA decided to keep the same level reference interest rate, despite some indications that anticipate a possible increase of 25 basis points.
At a time when the US economy is showing signs of overheating, with a very active labor market and in which inflation remains above the target, Fed Chairman Jerome Powell reported that rates will remain at their level, which represents a maximum since 2001.
Inflation “remains high,” anticipated Powell, who said he wants to evaluate the “cumulative effects” of the rate hike. “The fact is that the FOMC is not thinking about rate cuts at all at this time. “We are not talking about rate cuts,” he insisted at a press conference.
“The process to reduce inflation sustainably to 2% has a long way to go,” the leader pointed out and said that the Fed will maintain “a monetary policy stance that is sufficiently restrictive to reduce the inflation sustainably at 2% over time.
At the same time, Powell He did not rule out a new rise in December. “We haven’t made the decision yet,” she stressed.
What effect would an increase in interest rates in the United States have?
For analysts, if inflation remains high, the agency could apply a more restrictive monetary policy and, as a consequence, would make credit more expensive and defaults would arise in the commercial chain and in the real estate market.
From March 2022 onwards, the Fed The interest rate was raised eleven times, taking it from a range of between 0% and 0.25% to the current 5.25% and 5.50%. Most Wall Street analysts and investors estimate that the agency will keep rates in the range of 5.25% and 5.5%.
This happens in a context in which consumption continues to be supported by household spending based on credit, retail sales show no signs of contraction and factory orders are at high levels.
An indicator that reflects this is that the GDP of the United States grew 4.9% during the last quarter, which shows that the economy is moving at a dizzying pace, despite interest rate levels.
Source: Ambito
