First monetary meeting of the year Federal Reserve It emerges in an environment of moderate inflation and a labor market that continues to create jobs despite a sharp increase in rates. Investors and analysts are searching for their messages Jerome Powell This week there is a clue as to when the interest rate cuts the ECB has predicted for this year will occur. The market is divided on when the first 0.25 percentage point rate cut will come. What is less doubtful among analysts is that the Fed will keep the money price at 5.25%-5.50% this Wednesday, the highest level since 2001. The US economy continued to grow by 0.8% quarter-on-quarter and 3.1% annually in the fourth quarter. but forecasts point to cooling. Ricardo Murillo said, “We think that the Fed wants to soften the interest rate cut expectation that financial markets have already discounted. The institution will point out that there is still not enough evidence that prices will remain at 2% sustainably.” , economist at CaixaBank Research.
CME Group consulting firm’s FedWatch tool shows 97.9% of analysts believe the Federal Reserve will not raise rates this month. AXA Investment Managers chief economist Gilles Moëc stated that he did not expect any changes before this first meeting of the year, but that we should pay attention to “the signals Powell may give about March” today. In one of his statements, he points out that he is within 50%. The next meeting will be held on March 19 and 20.
American manager Muzinich & Co says there is an 84% chance of official interest rates being cut by 25 basis points in May. That’s because the core inflation index, “the Fed’s preferred measure,” was in December. “At 2.9% on an annual basis, it is below the psychologically important level of 3%.”. Strong US growth is accompanied by signs that inflation will stabilize around the 2% target, and this positive scenario does not require monetary aid, says Axel Botte, head of market strategies at Ostrum AM.
“The U.S. economy is proving to be much more resilient than most of us expected after historically strong increases.” interest rates officers The economy enters 2024 with solid balance sheets. A recent statement from the Federal Reserve opened the door to lowering rates, but this is likely to happen later and less than currently expected,” said Paolo Zanghieri, senior economist at Generali AM.
Macroeconomic indicators
GDP is one of the data the Federal Reserve analyzes to decide whether to raise rates. With inflation stopping its downward trend in December. Prices increased by three-tenths on an annual basis and inflation finished the year at 3.4%. This indicator had been falling on an annual basis since October, and the increase represented a setback to the Fed’s goal of returning the indicator to 2%. The US labor market is another piece of data analyzed by the Fed, and far from cooling, it remains solid. In December, net new job creation increased again, with 216,000 positions created; this was 43,000 more than those created the previous month, and the unemployment rate remained at 3.7%; the rate increases.
Regarding possible future outages, The median of Fed governors’ forecasts, which may hint at but do not necessarily mean cuts, showed in December that interest rates would be 4.6% in 2024. (equivalent to a range of 4.5% to 4.75%), will drop by one point to 3.6% in 2025 and reach 2.9% in 2026.