The Fed raises interest rates by 0.25 points but limits expectations of rises in 2019

The Fed raises interest rates by 0.25 points but limits expectations of rises in 2019



The Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) has unanimously decided to raise interest rates by a quarter of a percentage point, to an objective range of 2 percent. , 25% and 2.5%, thus fulfilling the expectations of the market consensus, which trusted that its president Jerome Powell would make a fourth increase in the price of money before the end of 2018.

The Fed has concluded, after the conclave held between Tuesday and Wednesday, that "some gradual increases" will be consistent and will support the expansion of economic activity and labor market conditions. However, the slowdown in the economy has caused the Committee to decide to reduce the possible rate increases for next year from three to two.

The Fed has concluded, after the conclave held between Tuesday and Wednesday, that "some gradual increases" will be consistent and will support the expansion of economic activity and labor market conditions.

The monetary authority has indicated that the latest data received show that the labor market has continued to strengthen and that economic activity has increased at a "strong pace". Likewise, it has pointed out that general and core inflation has remained close to 2% in the interannual rate, while long-term inflation expectations have not changed.

"The Committee considers that some additional incremental increases in the target range will be consistent with the sustained expansion of economic activity, strong labor market conditions and the medium-term inflation target of 2%," the entity said.

Thus, the Fed seems to have capitulated to the pressures of US President Donald Trump, since it is the first time that includes the word "some" to refer to how many additional incremental increases are still necessary.

The FOMC has also introduced a second change with respect to the September announcement, when the last interest rate increase occurred. Although they have once again pointed out that the risks are "balanced", he has warned that he will continue monitoring the global economy to "value" its implications in the economic forecast.

THREE RISES IN 2019

On the other hand, the Fed has published the update of its macroeconomic forecasts, as well as the projections of its members on the evolution of interest rates.

The 'dot-plot' or point diagram has changed, so that after this meeting the option of three increases in additional rates in 2019 is the one that has received the most votes from the monetary policy managers of the North American country. In the September projections, some came to estimate up to four or five increases

Specifically, the central projection of the entity aims that interest rates will close 2019 in a range of between 2.6% and 3.1%, against the range of between 2.9 and 3.4% estimated in September. The Fed has also lowered the forecasts for the price of money for 2020, which have been in a range of between 2.9% and 3.4%, two tenths less than before.

In terms of macroeconomic developments, the Fed has revised down its median economic growth forecast for 2018 to 3%, from 3.1% in September. The increase in GDP in 2019 has also been revised downwards by two tenths, up to 2.3%. The calculations for 2020 and 2021 remain stable.

Likewise, the central bank has maintained its forecast for the evolution of the labor market in 3.7% for 2018 and 3.5% for 2019.

The US labor market generated a total of 155,000 non-agricultural jobs last November and kept the unemployment rate at 3.7% (6 million unemployed), according to data from the Department of Labor.

The economy experienced an annualized growth of 3.5% in the third quarter of 2018, seven tenths below the expansion registered in the immediately preceding quarter, as well as the same previously advanced by the Office of Economic Analysis of the Government of the North American country.

On the other hand, the personal consumption expenditure price index, the preferred variable by the Fed to measure inflation, stood in October, the last data available, at 2% compared to last year. The monthly rate stood at 0.2% in the tenth month of the year, one tenth less than the previous month. Core inflation, which excludes energy and food prices given its greater volatility, also stood at 0.1% monthly, while the interannual rate rose 1.8%.

.



Source link