Expected cuts were postponed from June to the end of the year due to strong economic activity and more persistent inflation
O Itaú BBA joined financial institutions that became more pessimistic regarding the beginning of the rate cutting cycle fees in the United States and revised its projection for December this year, with strong activity and a higher CPI (consumer inflation) reading than expected by the market.
“We moved our expectation of the beginning of the interest rate cut cycle from June to December this year and continue to expect 3 cuts in 2025. Strong economic activity and more persistent inflation should lead to Fed [Federal Reserve, o banco central dos EUA] to wait longer and collect more data, before having the confidence to start the process of monetary easing”highlighted Itaú BBA in a report.
North American inflation surprised upwards in March for the 3rd month in a row, highlights the bank. “The high persistence of inflation at levels above those compatible with the target reduces the authorities’ confidence that the jump in the first two months was a temporary obstacle in the disinflation path desired by the Fed”.
Itaú BBA assesses that inflation measured by PCE core should slow down in the coming months, but consider that with resilient activity and pressured wages, “the trajectory could be even more erratic”.
In this scenario, the American monetary authority may need more time to regain confidence that inflation is losing steam and showing a sustainable trajectory towards its 2% target, which tends to postpone the beginning of the cycle of cuts in prices. Fed Funds (Fed Reserve Funds).
With information from Investing Brazil.
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