The Fed after the meeting of the Del Federal Open Market Committee (FOMC) of January has indicated that it wants to maintain a second consecutive break on rates in March. A motivated decision of a core inflation above 2% – to 2.6% year on year in January – and by an expected inflation on the basis of the investigations on the trust of consumers and businesses, accomplices the increases in duties imposed by the Trump Administration. For these reasons, he explained FRançois Rimeu, Senior Strategist of Crédit Mutuel Asset Management, we expect that, in line with the expectations of the investors, the Fed keeps the reference rate unchanged, in an interval between 4.25% and 4.50%.
Fed towards confirmation of restrictive policy
According to Rimu, “President Jerome Powell will reiterate that the current monetary policy of the Central Bank is well positioned to fulfill his double mandate: price stability and full employment. In the current context, characterized by a high uncertainty due to the economic reforms of the new US administration (relating to trade, immigration, tax policy and regulation), Jerome Powell will emphasize that the Fed prefers to be patient regarding future rates cuts, given the risk that they can trigger an increase in prices “.
Duties and inflation
The analyst claims that Powell will try to reassure the financial markets, leaving the possibility that during the year the expectations of the Fed on the medium term for an inflation can be reduced during the year capable of converging towards its 2%goal, a process that may require more time than expected. The president of the Fed will also underline that the increases in the duties could lead to a one -off increase in Consumer prices“Even if the central bank needs greater visibility in terms of flow and timing”.
The scenarios
As for the economic projections, Rinuu explained that no significant changes are expected in the growth rates of GDP for 2025 and two following two years (about 2%), thanks to the solidity of the labor market. The Unemployment rate PEr 2025-2027 should remain in a restricted interval between 4.2% and 4.3%. “In conclusion and as expected, the Fed should announce a break in the cuts of rates in March, slowing down or interrupting the reduction of the size of its budget. Federal Reserve will remain determined to report the inflation to its 2%goal, while supporting the full employment “, he underlined. For the Powell analyst in the press conference it will most likely reiterate that the central bank must maintain a restrictive monetary policy until the inflation is firmly in line with the aim of 2%. “We believe that the financial markets will react negatively to this meeting, given the strong expectations they nourished regarding the cuts of rates by the Fed after the mid -February. On the bond market, there is a flattening of the curve of US returns, “he concluded.
