Investors alert: what is at stake for the Fed with the US inflation data

For the data that will be known on Tuesday, the expectation is for it to be around 7.3%.

The Chairman of the Federal Reserve, Jerome Powell, had referred to the volume of future updates and was in favor of applying minor updates. Nevertheless, focus is on inflation performance.

About the rate update, the rise is expected to be 50 basis points, which would bring the rate to 4.5%. However, there is also the possibility, and subject to inflation performance, that the increase could be closer to 75 basis points. If applied, it would be the fourth consecutive increase in this volume in the year.

Fed policy pushed rates to their highest since 2007, in an attempt to curb inflation.

Facing the 2023, a group of economists consulted by the Bloomberg agency and projections of the Federal Open Market Committee of the FED (FOMC) confirm that the entity will increase the rate by half a percentage pointand estimate two other increases of 25 points at the meetings at the end of January and March.

The FOMC now forecasts that the rate will reach an average peak of 4.9% in 2023a range higher than 4.6% that the committee itself expected last September, and Despite the market’s expectation that the FED will begin to cut rates next year, it is now expected that the agency will reduce them to 4% until June 2024and, by the end of that year, to 3.5%.

Thus, the Fed assumes a more combative stance to inflationwithout fear that this will cause a slowdown in the economy by reducing working capital.

In fact, less than half of economists polled by Bloomberg expect rate cutsand those who do expect them consider that it will only happen if the country falls into a recession or the unemployment rate rebounds from the current 3.7% to a range of 5%.

The Fed’s effort to bring inflation to its 2% target appears to be paying off although, still, at a slow pace given that monetary policy usually has a delay in reaching the real economy: after reaching a peak of 9.1% per year last June, Inflation began to drop reaching 7.7% in the last index in October.