This is the online version of today’s edition of the Inside the Stock Exchange newsletter, which shows how the US Central Bank has been dealing with the soaring inflation, with the president of the agency already admitting the risk of recession as a consequence of the increase in interest rates. To subscribe to this and other newsletters and receive them directly in your email, register here. UOL subscribers are also entitled to two more exclusive newsletters about investments.
On Wednesday (22), Jerome Powell, chairman of the Federal Reserve (Fed, the US central bank), said that the institution is “strongly committed” to fighting inflation.
As part of this commitment, Powell informed that the Fed should quickly raise interest rates to the level considered neutral, around 2.5% per year, and then continue the upward movement in contractionary territory, that is, that discourage economic activity. .
However, the Fed chairman acknowledged that it will be challenging to bring inflation back to the target of 2% a year and keep the job market buoyant at the same time, and admitted that the rapid rise in interest rates could lead the largest economy on the planet to a recession.
According to Powell, the soaring inflation – which has accumulated an increase of 8.6% in the last 12 months – surprised the Fed and forced a sudden change in posture.
This shift is evident when we compare the “transient inflation” speech adopted in the first months of rising prices with the more recent speeches of the main names of the Fed, who recognize that the only way to achieve price stability is with a rigorous increase in the fees.
In this way, the market already projects that the US basic interest rate should reach the level of 3.4% this year, and could rise even more in 2023.
Read on ‘Investigando o Mercado’ (exclusively for UOL subscribers, who have full access to UOL Investimentos content): information on IRB Brasil’s disappointing results in April.
A hug,
Rafael Bevilacqua
Levante’s Chief Strategist and Founding Partner
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