The Fed does not plan to cut rates before September and, although it believes The latest data is “encouraging”. on inflation, believes that it is “too soon to state that the disinflationary process is long-lasting“: This is what the vice president of the Fed reiterated yesterday Philip Jefferson, speaking at an event in New York. Statements that strengthened expectations of higher rates for longer and made the dollar appreciate in currency markets.
Too early to claim victory
Jefferson reiterated that “it is too early to say that a disinflationary process will be long-lasting” and implied that it was Fed more likely to consider September as a potential date for the first cut, provided that data emerge in the coming months that confirm a deflationary picture.
Jefferson said strong rental growth is continuing to put pressure on the housing market and added that he will carefully evaluate incoming data.
The banker, in reality, He hasn't said whether he expects the rate cuts to begin this yearsimply stating that it will carefully evaluate incoming economic data, the outlook and the balance of risks.
The wait-and-see front is strengthening
Statements also shared by the Fed's vice president of supervision Michael Barrin a speech at a conference at the Atlanta Fed, where he called the recent data “disappointing”. of inflation in March, explaining “they did not provide me with the greater confidence I was hoping to find to support the easing of monetary policy”.
“We will have to give our restrictive policy a little more time to continue his work,” Barr said, reinforcing the ranks of those who have put possible rate cuts on hold.
Even the president of the Atlanta Fed, Raphael Bostic is of this opinion and, in an interview with Bloomberg, stated that the future “steady state” of interest rates Americans will probably be higher compared to recent times, perhaps reaching levels comparable to those seen in the 1990s.
April data awaited
And while the Fed representatives comment with a certain skepticism on the March data, which did not fully convince the bankers, although positive, More certain data is expected for the month of April.
In particular, the next week a figure closely watched by the Fed is on the calendar, the PCE index (Personal Consumption Expenditure), much more observed by the US central bank. In March, this figure marked growth of 2.7% and the April reading is now awaited, hoping for a further step forward towards the 2% target.
The dollar strengthens
Meanwhile, the confirmation of a wait-and-see policy by the Fed and higher rates for longer have caused a appreciation of the dollar.
Second Pictet AM, “the persistence of US inflation has supported the greenback and could lead the Fed to maintain rates at current levels also in the second half of the year”. For this reason, experts believe that “it is advantageous to have exposure to a rising dollar, since, for the moment, the Fed is forced to wait rather than loosen its monetary policy.”
Indeed, Pictet believes that “it may be the right time to exchange part of the Swiss currency for the dollar, given that the Swiss Central Bank has already started its easing cycle”.
