This conviction is reinforced by the data issued in the past hours, which showed a slowdown in the annual inflation rate in America, during the last month of 2022, to 6.5 percent, compared to a rate of 7.1 percent in the previous month, with the consumer price index declining by 0.1 percent on a monthly basis.
Although factors indicate that the decision to raise interest will be in favor of 25 basis points, any developments that may appear on the scene during the two weeks preceding the date of the interest decision on February 1, 2023 may make a return to the level of 50 basis points a possibility.
Ashraf Al-Aidi, CEO of Intermarket Strategy, said in an interview with Sky News Arabia that the Fed is convinced that the only way to make inflation decrease successfully and in a sustainable way, not temporarily, is through a slowdown in the economy, and therefore he wants to see few numbers. In new jobs, what is embodied in an increase in applications for benefits, indicating that the Fed is ready to make unemployment rise in America by 0.7 or 1 percent to become near 4.5 percent instead of the current 3.5 percent.
Al-Aidi adds that there is a factor that may push the Fed to return to levels of 50 basis points, which is that there will be a continuous rise in the “financial conditions” index, such as the rise in stock market indices and a continuous decline in bond yields, indicating that this factor leads to a renewed rise in inflation, which is what The feds don’t want it.
According to Al-Aidi, the trend now is to raise the interest rate by 25 basis points, as this will be reflected in an increase in the price of gold and a decrease in the price of the dollar. , as well as expectations of growth and demand in emerging countries, indicating that the path of oil prices in general will likely receive upward support in the second half of this year.
For his part, says Professor of Finance at the American University d. Wassim Dabouq, in an interview with “Sky News Arabia Economy”, said that the markets are convinced that the Federal Reserve is in the last stage of its stringent journey in fighting inflation, and therefore we will see an interest rate hike of 25 basis points, because the US economy is in a position that cannot be raised at a greater rate. .
Dabouq believes that the cumulative effects of the US Federal Reserve raising interest rates seven times during the year 2022 clearly appeared through the economic data that showed the slowdown in the inflation rate in America to 6.5 percent in December 2022, indicating that the markets were preparing in the past to raise the interest rate by 50%. basis points, so raising it now by a lower rate will have a positive effect.
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