They have shown that the trend of prices in the country is downward, if you look at the interannual CPI of the last two months. But the underlying data, discounting energy and staple foods, exemplifies that a high price environment will continue to stick to Americans’ portfolios.
The (Fed) faces this reality at the meeting scheduled for next week, where the institution will update its interest rate decision at the close of the meeting on Wednesday and from which comes off, at least, the same aggressive tone as the one seen to date, with four upward movements in 2022 and the last two of 75 basis points each.
The underlying CPI for August – at 6.3%, two tenths more than in the previous month – maintains pressure on the Fed’s hawkish discourse and this has led economists and investment firms to assess the possibility of a rise in a hit percentage point, which would leave the reference rates in the country in September at 3.5%. Of course, the market already anticipated this possibility, as seen in this week’s and in the price of bonds and the dollar. “Given that inflation continues to be more persistent than expected, it is not clear that reaching a higher rate slowly and gradually is preferable,” the Piper Sandler investment bank said in a statement.
In JP Morgan they consider that it is on the table of the officials of the , although they estimate in a third the possibility that this change will actually be announced. The position of a movement of 75 basis points continues to be the predominant one according to the Bloomberg market consensus. As the evolution of prices responds favorably to the changes applied by the central bank to date, no changes in pace are expected. “Good drivers don’t speed up as they get closer to their destination,” says JP Morgan chief economist Michael Feroli.
An acceleration in September, according to the expert, would suggest that in future meetings the Fed could be more flexible or even start lowering rates as early as 2023. It does not seem that this will be the case, according to most of the opinions expressed by The experts. Everyone assumes that the Fed will stay the course until US inflation hits the 2% target.
‘Farewell salute’ of 50 points
Perhaps the appointment of the Federal Reserve of the United States will be the one that monopolizes the international attention, but more the next five working days. The death of Queen Elizabeth II, and her national mourning, forced the Bank of England (BoE) to postpone the appointment until Thursday, September 22. After the queen’s burial, next Monday, the BoE will announce its particular salute of honor. Another 50 basis point hike is expected to be announced, as discounted from UK rate futures, to stem price escalation in the country – CPI fell to 9.9% year-on-year in August, from 10 .2% of the previous month-.
The highest monetary authority in Brazil will not make any movements, according to the market consensus, and will keep rates at 13.75% at its September meeting. In Switzerland, inflation has climbed to 4% in the latest data, a figure not seen in the country since 1993. This makes the market speculate with a rise of 50 basis points to -0.25% in search of interest rates. 0% and the empowerment of the Swiss franc against the dollar. Where no changes are expected is within the Bank of Japan, with rates below zero since 2015 and with prices at levels not seen since 2014.
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