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What consequences could occur in Europe?


By mid afternoon, November monetary policy meeting Federal Reserve (FED)Which began on Tuesday and will end for most analysts with an important decision: Fourth consecutive rate hikefollowing the path of tight monetary policy to suppress the still indomitable inflation and opened the door to identical decisions in other issuing banks such as the Bank of England and the Bank of England itself. European Central Bank (ECB). In September, the PCI CPI was 8.2% in the US, while the PCI used for pensions was 6.2% compared to the official target of 2% annually. With these wicks, several experts indicated that the institution headed by Jerome Powell will decide to raise interest rates by 75 basis points, or 0.75%, in the middle of the afternoon. This will put interest rates in the 3.75-4% range compared to the current 3-3.25% range. This will be the sixth increase since last March.

What will tighten the financing terms for individuals and companies in the United States, cool the economy further and, eventually, force European Central Bank To continue to raise prices by following a path similar to their American counterparts, albeit less severe. A few days ago, he headed the foundation Christine Lagarde It has already raised interest rates by 0.75% from 1.25 to 2%. A public appearance is also scheduled for Powell in the late afternoon in Europe, and here we must be attentive to his statements and the details he will provide about the future plans of the institution. In particular, everything related to the pace of rising interest rates.

Along those lines, PIMCO’s North American economist Tiffany Wilding and colleague Alison Boxer opted for a 75 basis point hike in interest rates and “Modest” changes in Powell’s public statements. In his view, “all attention will be focused on President Powell’s discussion of the Fed’s plan to slow the rate hike.” For the PIMCO analysts, no change in trend or any related change can be expected, but they explained, “Fed representatives will start sending trial balloons about a slowdown in the pace of rate hikes at upcoming meetings.”

They added, however, that the outlook for December is less crystalline in their opinion and they cautioned that the IPC could be “temporarily” strengthened by Hurricane Ian in the coming months, as well as showing concern about data such as the Employment Cost Index (ICE) as public sector wages remained and private at 5.6% y/y compared to high core inflation of 5.1% y/y.

Despite the fact that economic data in the US continues to move in a pattern similar to September’s – higher inflation and better employment data – both analysts emphasized that they expect “President Powell to signal an intent to Slow down the pace of price hikes relatively soon, before rates are kept high in 2023.” Nor do they expect more concrete accuracy from the Federal Reserve. In any case, Wilding and Boxer concluded that they expect The Federal Reserve raises interest rates to a range of 4.5%-5% “Before the pause” US real GDP fell 0.5% q/q in the last three months of the year due to “a slight increase in consumption, offset by increased negative fixed investment.”

Bank of America: Interest in the press conference

Analysts at Bank of America spoke in the same vein, also opting for a 75 basis point, or 0.75%, rate hike. “The MPC meeting is not about the interest rate decision in November but about Roadmap and future forecasts in December and beyond «Experts warned the entity, who believe that Powell “will open the door to lowering the pace of interest rate hikes in December and the discussion will appear during today’s press conference.” In this context, they agreed with PIMCO, in that the Fed chair would not provide too much evidence.

They also do not believe that today’s decision will have a favorable impact on the markets, especially if expectations of most analysts are met and interest rates are raised by 0.75% (75 basis points). Powell’s press conference will be more important to the markets. We see the Fed’s announcement as a support for the dollar in this context,” they concluded.

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