by Nino Sunseri
Economic and financial journalist for over 50 years, he started in 1974 at the Giornale di Sicilia. He worked in the roles of news manager and correspondent for Corriere della Sera, La Repubblica and Libero.
The bull run is over
No surprise. The Federal Reserve has decided to keep interest rates in the United States at 5.25%-5.50%, a level to which they were raised in July last year, the highest since 2001. Interest rates had been lowered to 0-0.25% in March 2020, to combat the negative effects of the coronavirus pandemic on the US economy, and then progressively raised from 2022. Now it announces that it will make three cuts of 0.75% within the year even if, unlike the ECB, the start date of the cuts is not indicated. For 2025, the US central bank estimates three further cuts (to 3.9%), one less than the latest estimates provided. The committee projects three more reductions in 2026 (to 3.1 percent) and then two more in the future, until the federal funds rate settles around 2.6 percent, close to what policymakers estimate to be the neutral”, which is neither stimulatory nor restrictive. Wall Street celebrates. The S&P 500 rises above 5,200.00 points for the first time in its history.
The economy is growing
However, there is no rush at the moment. The bank “does not expect it to be appropriate to reduce the target level until it has achieved greater confidence that inflation is moving sustainably towards 2%”. For the moment it is estimated at 2.4% for this year, to then fall to 2.2% in 2025 and 2.0% in 2026. GDP is expected to rise to 2.1% this year and 2 % next with unemployment stable around 4%. “The economy has made considerable progress – commented Fed President Jerome Powell during the press conference closing the meeting – However, inflation is still too high and the path to bringing it back to 2% is uncertain. We left rates unchanged at 5.5%. Our restrictive policy has put downward pressure on the job market and economic activity. The risks of our business are balancing out.” After Powell’s words, the American markets began to gallop, reaching new records.