Merida Yucatan. “We are at the beginning of the evolution of the problems of banking industry in the United States and, after what happened in Silicon Valley Bank (SVB), we will see if in the next few days the Federal Reserve will be able to act further on raising interest rates,” said Raghuram Rajan, former governor of the Reserve Bank of the India.
At the beginning of the second day of sessions of the 86 Banking Convention, the economist, who also worked at the International Monetary Fund, said that “the Fed is in a situation in which it will not land, neither low nor hard, and the question is what is the whirlwind in the financial market and if it will change”.
However, he considered that at next week’s meeting the Reserve could raise the interest rate by 25 basis points, but he clarified that it will still be necessary to see what happens between now and next Wednesday.
He insisted that the Fed sees what happened in the SVB and realizes that it is going to be difficult to lower interest rates, and said that the losses that the market has to absorb due to that bankruptcy fluctuate between 600,000 million dollars and 1.5 million .
But he considered it too premature to know what direction the Fed’s monetary policy would take at the meeting in a month and a half.
During the question and answer session, he said that “being aggressive with people monetary policies it creates financial problems”, but he did not refer specifically to the SVB, for which he said that the Fed should slow down its rate (of rate hikes) because it is a fact that there is a financial concern.
Inflation of 2.5% in the US, but in five years
The economist began his talk by talking about the challenge that the Federal Reserve has in the fight against inflation and said that although it has fallen, it has not been at the rate that the Fed would like, because although it reached levels of 8% and is now at 6%, “the most complicated thing is to go from 6 to 2.5%, and that is why the Fed is worried.”
For Rajan, services and housing are the sectors that are most affecting inflation in the United States, but it will go down for the rest of the year.
“What worries the United States is the service sector, but this has to do with the rise in labor.”
However, he clarified that the expectations of inflation in the US It remains around 2.5%, but he insisted that “it will be in a period of five years in the future”, and he insisted that the question is whether the reserve will be able to do much in the future.
