In a historic decision, the United States Federal Reserve (Fed) rose 75 basis points in an attempt to overcome the growing curve of inflation that is already hitting this country with historical records.
(Read: Fed makes the biggest increase in its interest rate in 28 years).
The Fed’s determination is in line with what the market had been expecting for a couple of days, after assuming the annual cost of living data for May (8.6%), revealed on Friday, and which was above what analysts expected.
With this increase, the third in a row by the monetary institution, the official interest rate of the US economy stands at range between 1.50% and 1.75%.
It is necessary to point out that an increase of this magnitude had not been registered since 1994 when the United States economic organism was directed by Alan Greenspan.
In this regard, Theodore Kahn, senior international economist at the firm Control Risks, indicated that there are more “worrying” signs that led the Fed to make this decision.
“Prices are rising not only in categories such as food and energy, which have been the most affected by the external situation, but also in the most widespread, also affecting various services.Kahn pointed out.
Carolina Monzón, manager of Economic Research for Itaú Colombia, pointed out that this Wednesday’s decision has a very marked bias up in the monetary cycle United States, where the pressures lead the authorities to “raise the rate not only to a neutral level, but even reaching contractive territory.”
Faced with this, at a press conference, Jerome Powell, the president of the Fed, left the door open to a new increase of 50 or 75 basis points at the July meeting, although he ruled out that this type of movement becomes common in the agency policies.
Other analysts, on the other hand, consider that this Fed stance it is exaggerated. “We think a 75 basis point increase is less than 50/50, given our macro projections. The incoming data will make it clear that such aggressive action is unnecessary,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
At the press conference, faced with fears of recession, Powell ruled out “financial stability problems” in the economy, sending a message of calm to the markets. However, this trend is still present, and it is not ruled out that the Fed’s curb could take its toll on US dynamics.
In fact, this very Wednesday, the Atlanta Fed advanced a no growth forecast (0.0%) of GDP in the second half of the current year.
“By controlling inflation, the Fed will see that its year-end rate hikes could be the tipping point to send this economy into recession,” said Edward Moya, senior analyst at Oanda.
The effects for Colombia
These macroeconomic decisions in the United States affect the decisions of investors in emerging markets, since it is more profitable to circulate money in this country.
(Also: The US states with the best salary to send money to Colombia).
In Colombia, according to Kahn, the dollar could increase its value, although part of this effect will also be due to the electoral issue. He also considers that it will imply higher financing costs.
Carolina Monzón foresees an acceleration in the Banrepública rate hike.
ROBERTO CASAS LUGO
