The vast majority of members of the United States Federal Reserve (Fed) agrees to reduce the pace of interest rate rises soon, as can be seen from the minutes of the meeting held by the institution in November. In this way, the US central bank would be inclined to raise benchmark rates 50 basis points in December.

Several of them also stressed the relevance of bring interest rates to a final level higher than previously anticipated. “The final level of interest rates that would be necessary to achieve the Committee’s objectives was somewhat higher than previously expected,” the document states.

At the conclusion of the November 1-2 meeting of the Federal Open Market Committee of the Fed (FOMC, for its acronym in English), its president, Jerome Powell, indicated that the reference rates would probably rise at a lower rate, but up to a higher level than indicated the last projections -published in September- of the institution.

[Powell desafía al mercado y avisa de que los tipos de interés pueden subir más de lo previsto por la propia Fed]

The last diagram of points -or dot plot- reflects that the members of the Fed themselves expect that interest rates stand at 4.4% at the end of the year and at 4.6% next year. The next meeting will take place on November 1 and 2.

“The minutes of the November meeting are likely to reveal a consensus among policymakers that the Fed needs to rein in rate hikes, but less agreement on the bottom line,” the economists at Bloomberg before the documents became known.

Fed members discussed the effects of policy delays on the economy and inflation, as well as when cumulative tightening would begin to affect spending and hiring. Several of them claimed that a slower pace of rate hikes would allow central bankers to judge the progress of their targets.

“The lags and uncertain magnitudes associated with the effects of monetary policy on economic activity and inflation were some of the reasons cited as to why this assessment was important,” the minutes state.

75 points

The US central bank has launched an aggressive monetary policy tightening campaign, including rate increases of 75 basis points in the last four meetingstriple the usual quarter-point increase.

Monex Europe experts already anticipated that even if the minutes indicated a slowdown in the pace of the tightening cycle, especially after the publication of the lowest CPI for October, it would continue “to show the determination of the Fed to keep the policy rate in tight territory for a significant period of time”.

The United States year-over-year inflation rate it moderated last October by five tenths, to 7.7%, which was the lowest annual increase since last January. With this latest data, the US Consumer Price Index (CPI) has moderated for three consecutive months since the peak reached in June of 9.1%, an unprecedented rise since 1981.

A few weeks ago, Fed Governor Christopher Waller stressed that the October inflation data was just one step on the way and that these would have to be succeeded by other similar readings to convincingly show that the price escalation is slowing down.

In addition, Waller, a voting member of the Fed’s Federal Open Market Committee (FOMC), noted that markets should pay attention to the “end point” of rate hikes, not to the rhythm of each movement, and that the end point is probably “a long way off”.

The strength of the US labor market It is another factor that the Fed could use as an argument to revise its projections regarding the maximum level to which rates will rise.

Despite The United States continues to create jobsIt does so at a slower rate. In October, 261,000 Americans found a job, up from 315,000 the previous month.

The unemployment rate rose two tenths, up to 3.7% after the number of unemployed increased by 306,000 people in October, up to 6.1 million.

Expectations

In any case, investors expect the US central bank to raise the price of money by half a percentage point at the meeting that the institution will hold in mid-December.

If the Fed finally, as it seems, raises them 50 basis points, the rates will reach the range between 4.75% and 5%, from the current range of between 4.25% and 4.5%, the highest level since 2008.

The latest comments made by the president of the Cleveland Fed, Loretta Mester, and her San Francisco counterpart, Mary Daly, have reinforced these forecasts.

I don’t think the market expectations are really bad.”said the first in an interview with the CNBC; while the second stressed at an event in California that “5% is a good starting point” to assess how far rates should go to restore price stability.

Source: Elespanol

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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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