The movement of the United States that anticipates the rise in the interest rate in Argentina

The United States Federal Reserve (FED) will announce a rise in its reference interest rate, which in the least of the cases would be 75 or 100 basic points, with the objective of issuing signals destined to have an effective control of inflation. so far this year, the Central Bank (BCRA) always applied a subsequent increase to this type of decisionfor which it could be interpreted as an anticipation of the movements of the authority led by Miguel Pesce.

The meeting of the Federal Open Market Committee (FOMC) began its two-day meeting, in an environment conditioned by high inflation that reached a growth rate of 9.1% at the end of the first half of the year, the highest level in the last 40 years. According to analysts, opinions are divided. While the main investment houses and banks estimate that the FED will adjust the reference rate by 100 basis points, most brokers and market operators believe that the agency will repeat the last increase of 75 basis points.

Thus, it is expected that at the board meeting, the BCRA will follow the same steps and raise the rate for the seventh time this year. Currently, the floor is set at 48% per year for 30-day deposits, up to 10 million pesos, which represents an Annual Effective Rate (TEA) of 60.1%. On the other hand, the yield of the Liquidity Letters (Leliq) at 28 days in 200 basic points went from 47% to 49%, which represents an Annual Effective Rate of 61.8%.

It is likely that the FOMC’s decision will not be reached unanimously since there are members who want to show the market that the organization wants to neutralize inflation. Several members of the agency’s board of governors expressed their preference for adjusting the rate by 100 points, although others favored a smaller adjustment, given the risk of leading the economy into a recessive cycle.

What is the United States looking for with this measure?

Fed Chairman Jerome Powell will likely acknowledge that downside risks to growth have increased, though he will reiterate a commitment to rein in inflation. The FOMC decision comes as the economy shows mixed data. On the one hand, the labor market, although showing salary tension and an increase in requests for unemployment benefits, shows that there are almost 10 million jobs available, which demonstrates the need for greater economic dynamism.

At the same time, analysts wait the next day for the government to report the evolution of the GDP for the second quarter to get an idea of ​​how much the rise in previous interest rates contributed to a possible economic deterioration. Estimates from the regional FEDs anticipate that GDP will fall for the second consecutive quarteror, which would lead to considering that the economy entered a recession, according to the vast majority of academics, although not, for the White House.

“Two negative quarters of GDP is not the technical definition of a recession,” insisted national economic adviser Brian Deese during a press conference at the White House. The official added that “The most important question economically is whether workers and middle-class families have more room to breathe.”

Another element to take into account is what decision the FED will adopt regarding the return of the titles and mortgages that the organism rescued from the banks and that it began to return to improve its balance that presents a red of 9 billion dollars. So far, the Fed has returned some $35 billion in Treasury bonds and some $17.5 billion in mortgages to banks, and the question is whether it will continue at that rate.

The market will also be watching the post-meeting press conference where Powell could give some indication of the evolution of inflation during the end of the summer, given the fall in the price of oil, the release of more strategic reserves of oil to lower fuel prices and reduce the risks of a possible recession.

With information from Telam

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