The United States Federal Reserve (Fed) This Wednesday it is preparing to keep interest rates unchanged for the third consecutive time, so the market’s expectation is focused on the signals it will give regarding the beginning of the relaxation of monetary policy for next year.
In quarterly economic projections to be released at the end of the two-day meeting, monetary authorities are likely to foresee at least a couple of rate cuts by the end of next year, in an attempt to find the right balance between a policy restrictive enough to slow spending and hiring, but not so restrictive as to cause a precipitous decline.
However, the president of the Fed, Jerome Powelll, emphasize that any cuts in manufacturing costs indebtedness is subject to further improvement of the inflationwhich despite a rapid decline this year remains above the US central bank’s 2% target.
“Powell will have to walk a fine line in recognizing the ground gained toward normalization of the economy, while rejecting the idea of early rate cuts,” and even warning that the Fed could raise rates again if necessary, analysts at TD Securities as the entity’s meeting began on Tuesday, Reuters reported.
And, indeed, the economy has become very normal. The inflation according to the preferred measurement of the Fedthe price index for personal consumption expenditures, fell to 3% in the latest reading, from more than 7% at its peak in the summer of 2022.
Meanwhile, the unemployment rate in November it fell to 3.7%, just above where it was when the Fed began raising rates from near-zero in March 2022.
As part of the updated projections, authorities will give their opinion on where the inflationunemployment and GDP in the coming years.
However the work Department reported Tuesday that consumer prices rose unexpectedly and core inflation accelerated in November, reminding why Powell might be reluctant to signal an end to the rate-hike campaign.
Still, financial markets continue to forecast one percentage point reductions in the Fed’s overnight benchmark rate next year, starting in May. The official rate is currently between 5.25%-5.5%.
These bets and the decline in the performance of Treasury bond 10 years from the meeting of the Fed October 31 to November 1 reflect a recent easing of financial conditions that, if continued, could complicate the entity’s efforts to control the inflation.
In their last monetary policy meeting, the authorities of the Fed They stated that they believed rising long-term bond market rates were doing some of the work of slowing the economy for them.
Source: Ambito
