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Fed does not rule out further interest rate increases

Fed does not rule out further interest rate increases

Yesterday the minutes of the meetings held at the beginning of May by the officials of the Federal Open Market Committee (FOMC) and the United States Federal Reserve (Fed) were published, in which they anticipate maintaining the reference rates still high.

The reference rate has fluctuated between 5.25% and 5.5% since July 2023, and is at its highest level since 2001; So why stick with a strict policy?

According to the document, Board participants observed “disappointing readings” on inflation in the North American giant during the first quarter as well as in other indicators that pointed to strong economic momentum, so they estimate that “it will take longer than expected to gain greater confidence that inflation was moving sustainably at 2%.”

uncertain outlook

It is worth noting that annual inflation in the United States, although it fell just one tenth to 3.4% in April 2024 and the underlying inflation – which excludes energy and food prices, the most volatile – is 3.6%; and they are far from the estimated 2%.

These data were known in mid-May, to which the president of the Fed, Jerome Powell, stated that it was “unlikely” to raise the reference rates that tighten credit; However, the minutes of the meeting reflect the disagreements within the FOMC.

“They have less certainty about whether the current level of the rate will be enough to continue cooling inflation to its 2% objective,” added Jaime Aritio, commercial manager of Renta4 SAB, for La República.

As an effect of the relevance of the Fed minutes, Wall Street The day ended in red, with a decline of 0.51% in the Dow Jones Industrial Average, its main indicator. The S&P fell 0.27% and the Nasdaq, 0.18%. At the local level, the Lima Stock Exchange (LSE) also ended with losses: -2.65% in the S&P/BVL Perú and the S&P/BVL Perú Selectivo, -3.09%.

The key

Eye. Peru is not immune to this fact and Renta4 SAB predicts that, if the rise in the reference rate continues, inflation would rise and commodities would lose value.

Source: Larepublica

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