Thus, a few weeks ago, Powell, the president of the monetary body, advanced that an increase of 25 basis points will be sought during the meeting that the central bank will hold on Tuesday and Wednesday.
“I am inclined to propose and support a 25 basis point hike,” Powell stated before the U.S. House Finance Committee a couple of weeks ago.
Since March 2020, the Fed’s interest rate has been between 0% and 0.25%. It is important to remember that with the dollar being the predominant currency in the global economy, any move by the Fed dictates the tone around the globe.
“I think we continue to expect this 25 basis point hike at the March meeting and other hikes will likely follow for the remainder of the year,” said Global Risk senior analyst Theodore Kahn.
Inflation in the global powerhouse, the underlying reason for the potential rate hike, hit its highest level since 1982 in February, reaching 7.9% in 12 months.
“For the Fed meeting the markets are incorporating the idea of the hike. I think it’s very difficult for the Fed to back out amid tightening and inflation data. I think they are ahead with 25 basis points,” said Diego Camacho, senior international economist at Credicorp Capital.
According to a survey conducted by the Refinitiv platform among more than 100 analysts worldwide (see chart), 95% believe that at this meeting the interest rate will be increased by 0.25 to 0.5 basis points. Meanwhile, another 95% expect rates to increase by 0.5 to 0.75 basis points at the Fed’s May meeting. The effects
As Russia and Ukraine are leaders in hydrocarbons, the bloody war between them is driving up fuel prices, for example, and this conflict is key to global growth prospects. Bancolombia Research Group, expects that “while the real impacts of this conflict on the economy are understood, we expect the FED to act with caution”.
For Khan, the geopolitical context is present in the Fed’s agenda, but he does not believe “that so far it has fundamentally changed the Fed’s vision”. In this sense, Camacho maintains that the Fed will maintain the rate hike, with a more moderate discourse, “taking care that it does not add more destabilization”.