For the Federal Reserve (Fed), prolong the interest rates “higher for longer“it means keeping them that way until at least 2026. The changes projected for 2024, 2025 and the first look at 2026 They offered additional clues about the direction the central bank anticipates.
Since they presented these projections in June, The Fed has eliminated 0.50% rate cuts for 2024 and 2025hinting that monetary policy will be above expectations long-term at the end of 2026.
It should be noted that the Fed’s economic projections They do not represent a definitive path for the institution. During the press conference, Fed Chairman Jerome Powellstressed that these estimates are precisely that: estimates.
“It is an amalgamation of the individual forecasts of 19 people, and then what you are seeing are the medians” Powell commented. “So I wouldn’t want to attribute [al gráfico de puntos] the idea that it’s really a plan“.
Inflation: how long will aggressive monetary policy last?
The commonly expressed idea about the Federal Reserve in recent months is that interest rates will remain “higher for longer.” This implies that even after the Fed concludes its current rate hike cycle and begins the tapering process, Rates will remain higher than what the Fed considers necessary to maintain economic growth with 2% inflation.
The exact term “more time” is central to investor debates about future Fed policy. However, at its recent meeting, the Fed offered new insight into its response: at least three more years.
Along with its decision to keep rates between 5.25% and 5.5%, The Fed released updated economic forecasts for interest rates, unemployment, growth and inflation.
The dot plot, which reflects officials’ forecasts for rates in the coming years, indicated that most Fed officials They believe another rate hike will be necessary this year.
The CEO of JPMorgan Chase & Co., Jamie Dimon, stated that the Fed may have to continue raising its benchmark interest rate in the coming months to combat persistent inflation. Dimon expressed that the central bank arrived “a day late and a dollar short“to begin adjusting rates, and the rapid increases of the last 18 months were “catching up“.
“The chances of them having to go up more than they are today they are older“Dimon stated.”I’m talking about four months from now, six months from now, that inflation will be at 4% and will not decrease for various reasons.“.
Inflation does not let up and central banks respond
The surprise drop in inflation in the UK sparked a precipitous sell-off in sterling as the data reinforces expectations that the Bank of England’s next rate hike could be the last,” writes Ipek Ozkardeskaya, senior analyst at Swissquote. Bank.
Remember that this Thursday There is a Bank of England meeting and the consensus expects an increase of 25 basis points. The question is, precisely, whether this will be the last increase or the organization will leave the door open to more increases.
Before the Fed, the European Central Bank (ECB) itsIt raised its rate by 0.25 points to 4% last Thursday, chaining ten increases in a rowwithin the framework of a monetary policy to anchor inflation in the euro zone, despite the pressure to stimulate the ailing economy.
The ECB governors raised rates again and They set the deposit rate at 4%, key for banking operations in the euro zonewhich now stands at its highest level since the introduction of this currency in 1999.
Likewise, the central bank adjusted upward its price forecasts for 2023 and 2024, with a rise of 5.6% this year.+
Along the same lines, the Central Bank of Türkiye increased the country’s reference interest rate to 30%, thus marking the fourth consecutive month of increase and placing it five points above its previous level, the highest since 2003.
Given the dizzying increase in inflation, approaching 60% year-on-year, the Central Bank expressed that “has chosen to continue with the monetary tightening process to achieve disinflation in the shortest time possible“, as indicated in an official statement.
The bank explained that “Inflation has exceeded expectations in July and August”, mainly due to the rise in oil prices, and anticipated future increases in rates in the coming months, “until the inflation outlook shows a substantial improvement”.
Source: Ambito
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