Investor doubts grow over Fed rate cut

Investor doubts grow over Fed rate cut

The United States Federal Reserve would not advance with more than one reduction in the year. Some experts do not rule out possible increases.

Photo: AP

The United States Federal Reserve (Fed) would not advance with more than one cut in the interest rates this year, as anticipated by the operators, who reduced their bets in that sense after the minutes of the last meeting on April 30 and May 1 showed that the authorities thought that the inflation It could take longer than expected to resolve.

“Participants indicated that they continued to expect inflation to return to 2% in the medium term,” the experts noted in the minutes of the meeting. Fed, but the disinflation It will probably take longer than thought.” It is worth remembering that the meeting three weeks ago was the sixth consecutive without changes in interest rates, which are in the range of 5.25%-5.50%.

Futures that adjust to the rate monetary politics The Fed’s forecasts reflected about a 59% chance that the U.S. central bank will cut rates in September, slightly less than before the minutes were released.

Meanwhile, contracts reflected almost equal odds of a second rate cut in December, down from the 54% seen earlier in the day.

Can rates go up?

Although the monetary policy response for now would involve “maintaining” the interest rate at its current level, the minutes, published this Wednesday, also reflected the debate on possible new increases.

“Several participants mentioned their willingness to tighten monetary policy further if the risks to the inflation are materialized in such a way that the measure is appropriate,” the minutes reported.

There was also debate about the degree of restriction of current monetary policy given the strength of the economy, an important issue given the need for it to be “sufficiently” restrictive to cool inflation.

Since then, those responsible for the Federal Reserve have moderated the expectations of imminent interest rate cuts, which investors anticipate starting in September.

But while Fed officials acknowledged the risk that the inflationary pressures rise again in the economy, they largely viewed the data from the beginning of the year as a temporary setback in the battle to return inflation to the 2% target set by the central bank.

Source: Ambito

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