Last week, the Federal Reserve increased its reference rate by 75 basis points, taking it to levels between 3 and 3.25%, this being its third consecutive increase since May.
Faced with the strong inflationary pressures in all the regions of the planet that simply do not yield, the central banks have adopted a policy of raising their interest rates as much as necessary, and for the period that is required in order to try to contain said pressures. , which do nothing more than generate greater poverty in the countries and increase the inequality gap.
Last week, the United States Federal Reserve increased its reference rate by 75 basis points, or three quarters of a percentage point, taking it to levels between 3 and 3.25%, this being its third consecutive increase since May this year.
Unlike then, when it was thought that an aggressive reaction could help control inflation in a relatively short time and have a soft landing for the economy, today it is not clear how long the Fed will have to continue raising the rate and yes he will do it aggressively.
In fact, the markets estimate that the reference rate could reach levels between 4.50 to 4.75% or more, in the first quarter of next year, generating strong expectations that the global economy will fall into a recession, causing many investors to seek shelter. in Treasury bonds and exit the stock exchanges, causing September to be the worst month since the 2008 crisis.
For now, for the meeting on November 2, the futures that operate in Chicago discount with a probability of 53% that the rate will rise by an additional 75 basis points, taking it to levels between 3.75 and 4 percent.
Until now, the products that have been constant in the inflationary pressures have been the price of fuel and food, which, without a doubt, have been affected by the war between Russia and Ukraine, which, like the rates , does not seem to be solved in the short term, but on the contrary, while in the case of food, various meteorological problems have played an important role in production levels, which has translated into effects on supply.
Due to the increase in rates, many investment funds began to get out of their positions in merchandise, which gave them a break; however, from the month of July the increases resumed. In the case of corn, the December contract listed in Chicago has gained 20.07% from July 22 to Friday’s close, while wheat in the same period has risen 21.41 percent.
In the case of energy, something very similar has happened. Although prices have fallen from the maximum levels reached in the year, next Wednesday, October 5, OPEC will meet to analyze the possibility of making cuts in daily production, which, added to the armed conflict, could generate additional pressures.
In Mexico, the Bank of Mexico applied the same recipe and dose as the Fed, last Thursday by raising the reference rate by 75 basis points to place it at levels of 9.25%, which means that it has increased 11 times since June 2021, already adding an increase of 525 basis points or 231%, and it is estimated that it could close the year at levels of 10.50 percent.
Undoubtedly, the increase in rates has a negative impact on economic growth, raises the financial cost of companies, which also translates into higher costs for ordinary people and, of course, a higher cost of debt for the Government, which means that more budget resources have to be allocated to interest payments. Additionally, governments must be careful with the support given to the population, since this can also translate into greater inflationary pressures.
What is a fact is that the light at the end of the tunnel is not yet visible, and that we will have high rates for a while.
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