USA, inflation gets the FED in trouble: further rate cut

The cut will come but it is definitely difficult for it to happen June, as some speculated. Most likely September. Recent inflation data is “disappointing”, we need greater certainty about progress on inflation “before cutting interest rates”. This is what emerges from the minutes relating to the meeting – which ended on March 20 – of the Federal Open Market Committee (FOMC), the Federal Reserve body responsible for the monetary policy of United States.

Fed, cut further

In March, the FOMC hin fact, he decided to leave interest rates at 5.25%-5.50%, level to which they were raised in July last year. Nearly everyone within the Fed, however, believes a rate cut is appropriate this year if the economy develops as expected.

Inflation disappoints

US central bank officials reiterated that rates will have to stay tall, if progress on inflation stops. American inflation that a March was stronger than expected for the third consecutive month. With US short-term interest rate futures falling after data showed the core consumer price index (CPI) rose 0.4% in March from February and grew up 3.8% compared to a year earlier.

Moreover, that Powell does not havein no rush to cut rates are now well known. Economic and inflation data have not “materially changed” the picture, it is too early to say whether the recent inflation data is just a temporary jump or not, the president of the Fed during his speech at Stanford University, reiterating that the American central bank decides its monetary policy meeting by meeting. The Fed “has time to decide” on possible cuts and wants to have greater confidence in the downward trajectory of inflation before reducing the cost of money – the banker said – adding that given the strength of the economy and the progress made so far on inflation, “we have time to let the data upcoming economic trends guide our decisions.” If the economy evolves “as we expect, most Fed members probably think a rate cut is appropriate at some point this year,” Powell said.

Will the ECB act sooner?

“The fact that the ECB cuts before the Fed is absolutely within our “plausibility range,” he writes Gilles Moëc, AXA Group Chief Economist and Head of AXA IM Research. “We note that the euro exchange rate has softened slightly despite the reversal of market expectations on policy rate differentials (at the beginning of February the consensus was still for a greater number of increases by the Fed compared to the ECB). This should encourage the ECB to make the right decisions for the euro arearegardless of what the Fed does.”