The Federal Reserve (US FED) plans a new interest rate hike before the end of the yearwhich presumably will be less than the previous ones, 50 basis points.
This was revealed this Wednesday after the publication of the minutes of the last meeting of the Federal Open Market Committee (FOMC) of the FED held at the beginning of November, in which the participants considered that there will be an increase of 50 basic points in their meeting scheduled for this month of December.
The attendees “focused increasingly on the question of when the Committee could reduce the pace of future increases, in light of the substantial tightening of financial conditions that have been observed during the year,” says the FED in the document published today.
On November 2, the regulator announced a rise of 0.75 points, the sixth consecutive increase since March, in a new attempt to control inflation. The official interest rate of the largest economy in the world came to be in a range between 3.75% and 4%the highest level since January 2008.
As anticipated then and confirmed today, Several of the participants noted that as monetary policy approaches a tight enough stance to achieve the objectives of the Committee, “it would be appropriate to reduce the rate of increase.”
Also, many participants commented that there was great uncertainty about the final level of interest rates and that this limit will depend on the next economic data, although it will probably be “somewhat higher than what they had previously expected”.
The president of the Fed himself, Jerome Powell, warned him in the press conference after the last announcement of the increase: “The data received since our last meeting suggests that the final level of interest rates will be higher than previously expected” , he claimed.
The members of the Federal Open Market Committee of the FED – which is made up of the seven members of the Board of Governors, the president of the New York FED and four other regional FED presidents who rotate each year – are the ones who decide whether to raise rates.
They meet about eight times a year to discuss the country’s monetary policy. The next and last of this exercise will take place on December 13 and 14.
In Colombia, Corredores Davivienda analysts mentioned that According to the Fed’s minutes, most FOMC members indicated that it would “soon be appropriate” to slow interest rate increases. Several officials highlighted that the uncertainty in the monetary policy lag justifies this change in position while considering that interest rates should rise to a level higher than the last forecast of the entity. Several members also expressed concern about the financial stability of some non-traditional financial institutions.
In this context, they pointed out that the international markets appreciated anticipating a ratification of the slowdown in the rate of increases in the Fed rates in the minutes of the meeting held on November 2.
“When this expectation was confirmed, the earnings trend continued. The DXY dollar depreciated 0.95% and the US treasury curve continued its investment process as long-term maturities (10 to 30 years) fell nearly 6 points, on average, while the two-year bond held its price of 4.72%”, they noted.