The Federal Reserve (Fed, central bank) of the United States
this Wednesday maintained its reference interest rate in a range of 5.25-5.50%
, and reported that it maintains the expectation of making three cuts within the year.
Maintaining high rates allows the members of the Monetary Policy Committee (FOMC) to
"carefully evaluate the incoming data, the evolution of the outlook, and the balance of risks
," the organization said in a statement after two days of meeting.
The president of the Fed, Jerome Powell, reiterated in a press conference this Wednesday that inflation in the United States remains "too high."
And although the rise in prices was contained and the labor market remains strong, "the current efforts to lower" this inflation
"are no guarantee of success,"
he cautiously clarified.
Inflation has moderated within the framework of the high-rate monetary policy promoted by the Fed for the world's largest economy.
High rates make credit more expensive and thus discourage consumption and investment, which reduces
pressure on prices.
Inflation in the United States reached 9.1% in June 2022
and the decrease in the index within the framework of the restrictive monetary policy adopted by the central bank did not lead the economy to a recession or a relevant increase in unemployment.
Since these highs, the PCE inflation index, which is the one most followed by the Fed, has moderated to 2.4% in the 12-month measurement in January, compared to 2.6% in the December data.
The New York Stock Exchange this Wednesday.
AP Photo
However, this year, inflation has gained a small boost and the market feared that the central bank would reduce its expectation of interest rate cuts, which ultimately did not happen.
Wall Street celebrated the Federal Reserve's decision with records.
The three indices closed at historic highs
after a 1.03% gain for the Dow Jones, which ended at 39,512.13 points;
of 1.25% for the Nasdaq, which stood at 16,369.41 units, and 0.89% for the S&P 500, which rose to 5,224.62.
FOMC members maintained their forecasts for headline inflation, but raised their forecast for core inflation, which excludes volatile food and energy prices, to 2.6%.
In any case,
they do not foresee changes in the projection for interest rates for the end of 2024
, and place them in a range of 4.50-4.75%.
This means they expect to reduce rates by 0.75 percentage points in total for the remainder of the year.
In December, the Fed's idea of making three cuts in 2024 raised great expectations in the markets, which assessed that a first reduction could occur in March.
But in the following months, the central bank's own officials used public appearances to warn that
too
rapid movements in rates could threaten the gains made on inflation.
Now the markets expect cuts only from June, or even later.
Futures brokers
assign a 65% probability
to a first cut in June.
The percentage rises to 80% probability that a first decline will have already occurred by the end of July, according to data from CME Group.
In a note to investors, Goldman Sachs economists lowered their expectation of reductions for this year from four to three, "mainly due to the slightly higher path that inflation took" in the first days of 2024.
The Federal Reserve also offered its forecasts for the United States economy this Wednesday.
The agency revised upwards its GDP growth forecast to 2.1% for 2024.
The unemployment rate, meanwhile, will rise less than the Fed expected, to 4% this year and 4.1% next year.
Source: AFP and AP
P.B.