The United States Federal Reserve (Fed) decided to leave unchanged the interest rates for the third consecutive time, while officials projected a cut of 75 basis points for next year.
The monetary authorities will maintain interest rates in the target range of between 5.25% and 5.5%, at their highest since January 2001, ratifying monetary policy. However, in the quarterly economic projections they anticipated reductions for 2024, something that is believed to be subject to a greater improvement in the inflation.
In the statement, those responsible for the central bank The US explicitly took into account the fact that inflation “has moderated over the last year” and stated that they will monitor the economy to see if “any” more rate increases are necessary, which directly implies that, after months of aggressive tightening and a trend to raise rates, it may not be necessary to do so again.
In fact, almost unanimously, 17 of the 19 Fed authorities predict that the official interest rate will be lower at the end of 2024 than now, with a median projection showing that the rate will fall 75 basis points, while none envisioned an increase. .
In a subsequent press conference, the president of the institution, Jerome Powell He underlined the uncertainty of the outlook and said he cannot definitively rule out an interest rate hike at this time, even though authorities are leaning toward a lower rate.
“While we believe our policy rate is at or near its peak for the tightening cycle, the economy has surprised forecasters,” he said. Powell.
Because of the unpredictability of the economy, he said, officials at the Fed “They don’t see it likely to be appropriate to raise interest rates further, but they also don’t want to take the possibility off the table” if necessary.
The forecasts in the previous one and inflation
“Powell will have to walk a fine line recognizing the ground gained towards the 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.
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.
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
