February 23, 2024

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The Federal Reserve will reveal the minutes for July after the CPI is not a ‘victory’ against inflation

There is no doubt that undo the Inflation in the United States In July, this week is over for the markets to react with optimism, as if it could be ruled out The price hike in the country had reached its ceiling.

However, voices have already come out inside Federal Reserve of the United States Under the pretext that “very Soon to declare victory “over inflation. These are the words of Minneapolis Federal Reserve Bank President Neil Kashkari, who had to calm market sentiment after learning about 8.5% CPI data in the US (six tenths lower than last month’s figure).

Kashkari even supports raising the benchmark interest rates Another 150 basis points in 2022 and continue to increase in 2023 though Pushing the US economy into recession. In addition, the person in charge of the Federal Reserve Board in Minneapolis considers it “unrealistic” that prices will begin to fall at the beginning of next year.

As Mary Daly, president of San Francisco, said last Friday, Inflation in the United States is still very high. The Fed chair chooses a 50 basis point move at the September meeting, although she is open to considering another 75 basis point increase if the situation calls for it. And James Pollard of St. Louis wants to see rates in the state at the end of 2022 at 4%.

If the remaining members of the Federal Reserve Share or not share this aggressive rhetoric It will be known next Wednesday when the authority publishes the minutes of the July meeting. At this meeting, a consensus was reached Raising rates in the country by 75 basis pointsthe second in a row from this depth and the fourth bullish change so far this year.

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At the moment, the market is discounting that there will be more increases in 2022 until closing the year rates at 3.5%, against a range of 2.25-2.5% to which it is currently set. This represents an increase of more than 100 basis points through December 31. In fact, the market consensus compiled by Bloomberg estimates that another rally of more than 50 points could reach the Sept. 21 date.

Despite the fact that inflation has opened the door for the Fed to take its foot off the accelerator, Unemployment rate in the United States standing at 3.5%, which is one-tenth less than the figure this indicator has maintained for the previous four months. Which is that the 528,000 job creation in July (which exceeded market expectations by more than 30%) could destabilize the market because the good employment figure “can be explained by the Fed because its rate increases do not slow the economy. The recovery will allow them to Be bolder in raising interest rates to fight inflation.Behind what extremist Whatever the Fed’s next month, no changes are expected to Chairman Powell’s roadmap for the remainder of the year, Federated Hermes understands.

Inflation is not falling in Europe

It may be in US prices rise Before and after, but in the euro area inflation is still rising. Although the CPI data for July has already been advanced two weeks ago, the final data will be released next Thursday, in which no changes are expected, according to the Bloomberg. Thus, all member states It will register an increase of 8.9% Compared to 8.6% in the previous month.

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The same will happen with the combined GDP, which remains at 0.7% for the second quarter of 2022. In other words, prices rise in the euro area and their growth The economy is not showing signs of fatigue. However, investors continue to show signs of pessimism, as reported by the latest ZEW confidence index in Germany and for the August survey (to be published on Tuesday) will remain at the same level (around -53%).

Also in the UK the CPI for July will be released next week. The market expects inflation to rise to 9.8% in the country (four-tenths more than the previous month). In addition, GDP rose yesterday for the second third of the year. In this case, an increase of 2.9% was recorded, similar to what the market expected. “It is the first negative quarterly data since the first quarter of 2021 GDP is already suffering from the effects rate hikes by the Bank of England, but it fell less than expected,” Bankner estimated.

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