Neither the fall of Silicon Valley Bank, nor the contagion of Signature, nor the problems of the First Republic. The North American Federal Reserve (FED) has decided to focus on keeping inflation at bay in the face of financial prudence after raising interest rates another 0.25 basis points to 5%, as planned before the problems of worsening the last few weeks in part of his bench.
The near financial crisis has not made a dent in the agency’s decision, which continues to consider lowering prices a priority, just as the European Central Bank (ECB) did last week. It’s not that they didn’t take into account the banking turmoil. In fact, Fed Chairman Jerome Powell admitted that Federal Reserve committee members had on the table the possibility of applying a pause on their rate hikes at this meeting. But they finally discarded it.
With this latest increase, the price of money is in the range between 4.75% and 5% in the main world economy. It was the margin that the FED had had since its previous meeting last February, when it insisted on the need to raise rates as a formula for consumption to subside, the economy to cool down and, finally, prices to be contained. In fact, the Dow Jones was almost flat after the decision.
Such is the commitment that the market predicts a new additional rate hike in the US throughout this year. And from there, the rate cuts will begin. But “it will not be this year,” Powell pointed out yesterday, with a devastating phrase: “Without price stability, the economy does not work for anyone,” he said.
At the beginning of his appearance after the FED meeting, he pointed out that they acted decisively with Silicon because “financial problems that are left unresolved can threaten the entire system.” He insists that there is room for action if necessary, and advocates vigilance. But nothing else.
A week ago now, the ECB also remained true to its word and announced a rate hike of 50 basis points, as advanced in February, thus raising the price of money to 3.5%, despite the collapse from US entities or from the rescue of the Swiss CreditSuisse. The president of the ECB, Christine Lagarde, sent a message of calm to the markets and assured that the institution “is ready” to provide liquidity to the system if necessary.
No drops this 2023
The FED insists that for now there are no great signs of having controlled inflation. Or at least to have done it forcefully. And rule out any rate cut. “The committee anticipates that additional monetary policy tightening may be necessary to achieve a sufficiently tight monetary policy stance,” the agency’s statement said. Just a week ago, the most pessimistic saw a first cut in the second half of the year, far from the second half of this year, which was discounted last week.
The US labor market created 311,000 jobs last February, with an unemployment rate at a minimum of around 3.6%, according to the Labor Department’s Bureau of Labor Statistics, despite being two tenths higher. to January.
The economy of the world’s leading economy experienced annualized growth of 2.7% of its GDP in the fourth quarter and 2.1% in the whole of 2022, revealed the Bureau of Economic Analysis (BEA, for its acronym in English). . Likewise, the personal consumption expenditure price index, the variable preferred by the FED to monitor inflation, stood at 5.4% year-on-year in January and four tenths more than the previous month. The monthly rate registered an expansion of 0.6%, five tenths more. The underlying variable, which excludes energy and food prices from its calculation due to their greater volatility, stood at 4.7%, three tenths more.