The Federal Reserve (Fed) of the United States has decided to cut interest rates for the third time by 0.25 points to 4.5%, after doing so by another quarter of a point in November and, before, in September, lowering them by half a point at a time before the moderation of inflation towards the theoretical objective of 2%. However, it has increased its forecast to 2.5% on average in 2025, from 2.1% previously.
Furthermore, the Fed’s own new roadmap for interest rate cuts in the coming months now points to only two more cuts of 0.25 points, which would leave the reference rate at 4%.
The North American central bank began a new stage in November with Donald Trump back in the White House. In his previous stage as president of the world’s leading economy, he already ignored the supposed independence of monetary policy and publicly pressured the institution, which is currently in the process of easing financing conditions (lowering the cost of loans, mortgages…).
Until now, the cuts announced by Jerome Powell, the president of the Fed, were part of the ‘script’. But, according to most experts, the United States economy has proven to be more resilient than the central bank expected just a few months ago.
Recent data show that inflation is falling more slowly than Federal Reserve economists anticipated and that the labor market is not weakening as much as feared. This new perspective supports greater aggressiveness in 2025. That is, fewer drops in the official ‘price’ of money.
From our point of view, the European Central Bank (ECB) is conditioned by the Federal Reserve because if a large gap opens between the rates of the eurozone and the United States, a depreciation of the euro could occur with respect to the inflationary dollar (for the eurozone), because imports of oil and other raw materials or products that are traded in dollars would automatically become more expensive due to the effect of the exchange rate.
Last week, the ECB announced the fourth drop of 0.25 points in official interest rates in the eurozone – to 3%. The institution is confident in the moderation of inflation to the theoretical objective of 2% in 2025 and, this same week, its president, Christine Lagarde, indicated that, if there are no surprises, the ‘price’ of the reference money for the mortgages and loans in general during the coming months.
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