WASHINGTON.— This Tuesday, members of the Federal Open Market Committee from Federal Reserve (Fed) USA begin their meeting in March, in which, as the institution had warned, no changes are expectedDue to the persistence of high inflation.
Interest rates unchanged
In their last meeting, which took place on January 30 and 31, it was decided maintain interest rates in the current range of 5.25% and 5.5%, its highest level since 2001, and it was anticipated that if the economy evolves positively there will be declines this year, although not in this new appointment that concludes on Wednesday.
CPI in February: 3.2% year-on-year
At this time it has been made public that the Consumer price index (IPC) rose to 3.2% in February at an interannual level, while compared to the previous month it increased 0.4%, above what was expected by analysts and very far from the 2% target marked by the Fed.
For Steven Bellchief economist at asset manager EMEA – Columbia Threadneedle“Slightly stronger US inflation in the first months of this year is not surprising given the strength of the economy in late 2023.”
CPI of 3.1% at the end of 2023
The United States closed 2023 with a growth in its gross domestic product (GDP) of 3.1%, as indicated by the Bureau of Economic Statistics (BEA, in English), thus leaving behind concerns about a recession.
But in Bell’s opinion, the inflation data “has curbed expectations of rate cuts.” Although in his opinion the pessimism in this regard “is exaggerated,” this rise in prices could cause the Fed to adopt “a line of caution.”
Axa Investment Managerswhich manages some 840 billion euros in assets, agrees that the level of conviction regarding a short-term decline has been falling: “Last Friday the market valued the probability of cuts in June only slightly above 50%, compared to more than 80% just a few weeks ago.”
It is possible, in his opinion, that the inflation data will take longer than previously thought to demonstrate “beyond a reasonable doubt that full convergence towards the Fed’s objective is materializing.”
“Less restrictive financial conditions”
On March 6, in his Beige book economic outlook, the Federal Reserve predicted that there will be “less restrictive financial conditions” in the coming months, an indication that interest rates could fall before the end of the year.
According to Axa Investment Managers, however, the market is beginning to be concerned by the feeling that its “window of opportunity” is “limited.”
If there are no cuts before June, or even July, there might not be any at all in 2024. “The logic is that if at the end of spring the economy is still too strong to justify a rate cut, it may be rational to wait.” until there is a clear signal on fiscal policy after the (November) elections to calibrate the monetary response,” he points out.
Mixed macroeconomic data
For Ebury, fintech specialized in international payments and currency exchange, the Fed is still “at least a couple of meetings away from lowering rates.” The macroeconomic data available so far, he emphasizes, has been “rather mixed,” and Fed members will want to see “more evidence of a downward trend in inflation (…) before committing to cuts.”
But the US Treasury Secretary, Janet Yellenwarned this month that the decrease in inflation It may not be “smooth”: “I wouldn’t expect it to be an easy month-to-month path, although the trend is clearly favorable,” he said on Fox News.
Ostrum AMgroup manager Natixis Investment Managersconcludes that this March meeting “may be an opportunity to adjust guidance on balance sheet reduction policy and confirm prospects for lower rates.”— (By Martha Garde).
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2024-04-05 10:38:36