Market attention is focused on the decision of the Federal Reserve's two-day monetary policy meeting, which ends this Wednesday, 27, indicating what the US interest rate will be and what the next policy steps will be. contractionary currency.
The projections compiled by Investing.com indicate that the Fed is expected to raise US interest rates by 75 basis points, the same magnitude as the last meeting, which was the biggest hike recorded since 1994.
In this way, the interest rate range of EUA would be between 2.25% and 2.50% per year. The US faces the highest inflation recorded in 40 years.
In the month of June, inflation measured by the Consumer Price Index reached 9.1% in twelve months, with a monthly increase of 1.3%.
According to the Bureau of Labor Statistics, the increase was broad and pressured by gasoline, housing and food.
Core inflation, which excludes volatile prices such as commodities and food, increased 0.7% in June and 5.9% in twelve months.
In a report released to the market, BTG said it estimates a rise of the same magnitude, with few changes in the statement, but a press conference in Tom Hawkish.
The bank considers that the Fed recognizes an accommodation of economic activity, but believes that the American monetary authority understands as its main objective at the moment the fight against inflation.
Claudia Rodrigues, economist at C6 Bank, believes that the Fed should raise interest rates by 0.75 point and highlights that attention will focus on the speech of Jerome Powell, chairman of the Fed, after the disclosure, where he can indicate the next steps of the policy contractionary currency.
“Almost 100% of the market is already pricing in the 0.75 percentage point increase. Anything different from that will be a big surprise with the potential to move the market”, says Claudia Rodrigues.
According to Rodrigues, the release of recent inflation data shows an acceleration in the IPC, which led to the belief that the Fed would raise interest rates by 1.0 percentage point.
“However, recent statements from Fed members and data showing lower expectations for long-term inflation and retail in line with expectations made expectations return to around 0.75 p.p.”, adds Claudia.
Market agents are waiting for Powell's signal about the next hikes, given that the Fed's own members project an interest rate close to above 3% by the end of the year, indicating that the tightening cycle is not yet close to the end of the year. The end.
The pace of these increases, however, is still uncertain. For the C6 economist, the most likely option is that Powell will keep the doors open and indicate that future increases will depend on the next releases of inflation and economic activity in the US.
Marcela Rocha, chief economist at Claritas, expects the pace of monetary tightening to continue.
“Since the last meeting, we have had mixed news on the economic scenario. On the side of inflationary pressures, we had labor market data and the June inflation index with negative news”. says Marcela
The maintenance of unemployment at a low level and a strong level of higher-than-expected wages show that the Fed has no room to reduce the highs.
Despite this, other news shows that the Fed would not have to intensify its tightening, with slowing economic activity indicating contraction in some sectors, with both existing home sales and new home sales falling.
Maria Levorin, manager of Multiplica Capital, agrees with the view that the Fed should raise interest rates by 0.75 percentage point.
“It is important to mention that the rise in interest rates will not be enough to reduce the rise in prices and should still worsen the credit situation of companies, increase the risk for banks and discourage investments, leaving part of the possibility of the country's growth on the table. ”, ponders Mary.
The vision is contemplated by Raone Costa, chief economist at Alphatree, who says that the discussion about recession and confidence close to historic lows contribute to the contraction not being greater.
“The Fed is trying to quickly raise interest rates to levels that are not as stimulating as before and from there further increases will be made more sparingly.” says Raone.
Débora Nogueira, chief economist at Tenax Capital, also expects a rise of 0.75 percentage points.
“At the last meeting, there was an acceleration of the pace of 0.50 p.p. to 0.75 p.p. following very high monthly inflation and a higher inflation expectation indicator. Since then, we have had a very high CPI, above 9%, in June it was even higher than in May, with highs spread across segments that tend to bring more persistent inflation, it was an indicator with very poor quality. On the other hand, longer inflation expectations have subsided a little”, adds Débora.
Lower oil and gasoline prices influenced long-term projections.
As much as there is a tendency to weaken economic activity, the FOMC should not indicate changes in policy, according to the economist, but rather a tough speech to combat inflation.
The same view follows with Christopher Galvão, an analyst at Nord Research.
“The Fed is set to push a new 0.75 percentage point high and no argument would justify a step down. For the next meetings, everything depends on the tone, but the market believes in a smaller reduction, of 0.50 points”, says Galvão.
Sources: investing.com
