Washington, June 11 (EFE).- The United States Federal Reserve (Fed) once again captures all eyes this Tuesday with the start of a two-day meeting in which, although no reductions in interest rates are planned, they are could outline the schedule for possible cuts this year.
In their last meeting, on April 30 and May 1, rates remained in the range of 5.25% to 5.5%, a range that constitutes their highest level in 23 years and that remains unchanged since July of last year.
In the minutes that were later published about that meeting, several members of the Federal Open Market Committee (FOMC), the body in charge of deciding whether or not to raise rates, mentioned their willingness to tighten monetary policy even further if the risks to inflation materialize.
That comment came before it was known that the inflation rate in the United States fell one tenth in April, to 3.4%, after two months of consecutive increases.
Meanwhile, core inflation, a key data that the Fed analyzes in its decision-making, fell two tenths year-on-year, to 3.6%, and in monthly terms it grew three tenths.
The latest inflation data for May will be released on Wednesday, the same day the new rate decision will be announced.
“The Fed has indicated that it needs to see several consecutive months of much more controlled inflation before it starts cutting rates,” explains MFS Investment Management chief economist and portfolio manager Erik Weisman.
Last March, the agency anticipated three possible rate cuts this year, a forecast that has raised doubts.
“We expect a change in the ‘median forecast’ to two cuts for this year (in September and December), compared to three (estimated) in March. There is a risk that it will be reduced to just one,” adds Gilles Moëc , chief economist at AXA IM.
That last possibility, however, has a strong political reading. “It would send too harsh a message. It is clear that the Fed has given up on cutting before the presidential elections” in November, the expert points out.
However, according to Deborah A. Cunningham, director of Global Liquidity Investments at the manager Federated Hermes, “the idea that the Fed will avoid cutting rates in September so as not to appear to be interfering with the elections, renouncing the action of the types when the data warrants it, could also appear to be politically motivated.
The argument cuts both ways, which is why investors will be closely analyzing both the FOMC announcement on Wednesday and the press conference by Fed Chairman Jerome Powell, who highlighted in May that rates are likely to stay high longer than expected.
To decide when it is time to lower rates, the Fed also takes unemployment data into account among macroeconomic data. This rose one tenth in May compared to April, up to 4%, the highest figure since January 2022.
However, after plummeting in April to 165,000 jobs created, in May there was a recovery in the net creation of new jobs to 272,000, some 107,000 more than those generated a month before.
“In this ‘data fog’ it is likely that the Fed’s forecast on its trajectory will be the focus point of this week’s FOMC meeting,” concludes the chief economist of AXA IM, who still sees it possible that the flow of data “will become clearer enough” in the summer to be able to begin removing part of the restrictions in September. EFE
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