Fed begins its last meeting of 2023 that could end the rate hike

The Federal Reserve begins its last meeting of 2023 this Tuesday, a meeting that according to experts could dictate that the end of the increases in interest rates has arrived, although its decline is still not in sight in the near future.

Analysts and economists are convinced that the Fed will pause again in December, as it did in its two previous meetings.

According to the CME Group consulting firm’s FedWatch tool, 98.4% of analysts believe that the Fed will not raise this month.

With this, it is very likely that interest rates in the United States will close the year at the current range of 5.25% and 5.5%, their highest level since 2001.

All this after having carried out eleven climbs since March 2022, four of them this year.

The members of the Federal Open Market Committee (FOMC, in English) of the US regulator, the body in charge of deciding whether or not to raise rates, begin this Tuesday to debate whether more increases will be appropriate before the end of the year and tomorrow the president of the regulator, Jerome Powell, will announce his decision.

The meeting begins the same day that it was learned that US inflation has continued to moderate and its interannual rate stood at 3.1% in November, one tenth below October.

Core inflation, which measures the rise in prices without taking into account energy or food – and is one of the indicators on which the Fed focuses most to make its decisions – remained at 4% in November in its interannual rate. .

In the opinion of the head of Global Liquidity Investments at the fund manager Federated Hermes, Debbie Cunningham, the body run by Jerome Powell “will not repeat the mistakes of the past”, so, even if they decide to maintain rates at this Wednesday’s meeting, “the game is not over.”

“We believe the Federal Reserve has entered a period of higher rates for longer that will likely last at least through the second half of 2024,” explained in an analysis.

The same opinion is shared by DWS economist Christian Scherrmann, who believes that “The Federal Reserve’s current dilemma is to convey a very hawkish message without actually acting aggressively.”

For Paolo Zanghieri, senior economist at Generali Investments, this week the Fed will have to convince the markets that the rate cut “It’s not around the corner” while Gilles Moëc, chief economist at AXA Investment Managers, believes that “no changes are expected in monetary policy” forks “Powell is likely to say at the press conference that it is too early to consider cuts.”

The Fed will make its decision when the United States has registered an unexpected rebound in its gross domestic product, advancing 1.3% in the third quarter, with an annual growth rate of 5.2%.

In addition, the labor market seems not to be suffering the consequences of the rate increases. The unemployment rate in the United States fell two tenths in November compared to October and stood at 3.7%.

After having fallen in October due to automobile sector strikesthe net creation of new jobs rose again in the eleventh month of the year and 199,000 new jobs were created, 49,000 more than those generated a month before.

Still, the 199,000 jobs created are still below the average monthly gain of 240,000 for the previous twelve months, although it is in line with employment growth in recent years.

In a public event held a few days ago, Powell stated that it is “premature” conclude that the Fed has raised rates “enough” enough to firmly contain prices.

“It would be premature to confidently conclude that we have achieved a sufficiently restrictive stance, or to speculate on when the policy might be relaxed. “We are prepared to tighten the policy further if it is appropriate to do so,” stated the president of the US central bank.