Post-Fed Uncertainties Continue
The US Federal Reserve (Fed) raised the policy rate to the range of 4.75-5 percent, the highest level in the last 16 years, yesterday after the collapse of 3 banks in the country and the process in which overturned the expectations in the markets. The other way around.
It was felt that the use of the phrase “some further tightening” would be appropriate to achieve a monetary policy stance tight enough to return inflation to 2 percent, instead of the earlier use of “tightening is expected to continue” in the text of the resolution. like a dove in the markets.
In the statement, it was noted that the cumulative tightening of monetary policy, delays in the effect of monetary policy on economic activity and inflation, economic and financial developments will be taken into account when determining the pace of rate increases. of interest, and it was emphasized that the US banking system is “solid and resilient”.
While the fact that inflationary pressure did not come to the fore in the Fed’s projections for the economy as much as feared, it bolstered estimates that interest rate hikes are coming to an end, the Fed chairman’s remarks , Powell, showed that uncertainties about the future period can have an impact on prices for a while.
THE EXPECTATION OF INTEREST HAS NOT CHANGED AT THE END OF YOU
In announcing its forecasts for the economy, the Fed did not change its forecasts for the federal funds rate for this year.
Forecasts for the federal funds rate were left at 5.1 percent by the end of this year, while for 2024 it was increased from 4.1 percent to 4.3 percent. The bank kept its forecast for the federal funds rate at 3.1 percent for 2025. The expectation for the long-term average interest rate remained at 2.5 percent.
The bank’s inflation forecasts increased from 3.1 percent to 3.3 percent this year, holding 2.5 percent for 2024 and 2.1 percent for 2025. Estimates for core inflation, which does not include Variable energy and food prices increased from 3.5 percent to 3.6 percent this year and from 2.5 percent to 2.6 percent next year, while by 2025 they rose to 2 percent. hundred. They stayed at 1.
Analysts said the Fed is forecast to initiate 25 basis point interest rate cuts from the June meeting on money markets pricing, noting that although Fed Chairman Powell responded yesterday negatively to the question about this situation, the pricing continues.
Answering questions after the meeting, Powell said: “The members have no such foresight.” he responded on the form.
The growth forecast for the US economy was lowered from 0.5 percent to 0.4 percent this year and from 1.6 percent to 1.2 percent for next year, from 1.8 percent to 1 percent by 2025. increased to 9.
Analysts noted that the slowdown trend in the US economy was not at the level expected by the Fed, but said concerns about the banking sector may have narrowed the Fed’s policy space.
Analysts noted that expectations about the Fed’s moves were fairly scattered ahead of the meeting and said that most of these uncertainties continued after the meeting. (AA)