The United States Federal Reserve decided to hold, for the fifth consecutive meeting, the benchmark federal funds rate in a range of 5.25% to 5.5%the highest since 2001.
US monetary authority officials indicated that they maintain their outlook for three quarter-point rate cuts this year and fewer cuts by 2025, Bloomberg indicated.
The Monetary Policy Committee of the Central Bank considers that “the risks to the achievement of its employment and inflation objectives are reaching a greater balance.”
Why the Government lowered the interest rate on fixed terms
The Federal Reserve maintains the position that rate cuts will not be appropriate until officials have more confidence that Inflation is moving sustainably towards its 2% target.
The central bank also reiterated its intention to continue reducing its balance sheet up to US$95 billion a month.
From the consulting firm Balanz they pointed out that “the updating economic projections “It was one of the most anticipated aspects, particularly after the inflationary resilience in the first two months of the year.”
“Members of the monetary policy committee expect a monetary policy rate at 4.6% in 2024, 3.9% and 3.1% in 2025 and 2026, respectively, above the 3.6 and 2.9% indicated in the December meeting for 2025 and 2026, respectively. On the inflation side, Fed members kept their estimate unchanged at 2.4% for 2024,” the report adds.
What impact can it have for Argentina?
Regarding the effect that this FED decision may have for Argentina, Andrés Reschini, from F2 Soluciones Financieras, told PERFIL that “three rate cuts of 0.75 pp are projected in 2024. If a smaller cut had been planned, the rate at the end of the year would be higher than expected and that was going to have a negative impact on asset valuations, financing costs and particularly on the value of the commodities that Argentina exports.”
“The risk was a projected cut lower than expected and that did not happen. Most likely there will still be three cuts. In any case, the inflationary dynamics of the United States will continue to be analyzed,” added the economist.
LM