He tsunami of rising interest rates in the US has reached its maximum height. No less than 525 basis points of a monetary wave that continues to sweep through the economy and radically change financial conditions in a matter of months. Everything is about to change. The Fed captain has again dropped in a speech this Friday that a change in monetary policy is underway, as he telegraphed in the official meeting at the beginning of May: it does not seem that further rate increases are necessary.Jerome Powell is aware that the US economy is experiencing a critical moment of transition, in which the disinflation accelerates, some relevant indicators are already on the brink of a banking crisis and congressmen are playing Russian roulette on the debt ceiling. It is time for the other of the Atlantic to pause to avoid greater evils and, above all, a 180-degree turn cutting types born of haste. By contrast, the president of the European Central Bank (ECB), Christine Lagarde, believes that the euro zone still has ground to cover raising rates from the current 3.75%. He’s right because he’s late. For some still unexplained reason, the European authority began to rise months later than the Fed and other central banks when inflation was running much more strongly than it is now. On Friday hours, after Powell, the French banker insisted again that her pulse will not tremble and, therefore, she anticipated that there will be another movement in June. In reality, the ground that the ECB has to cover is not so much that of inflation, clearly normalizing, but the interest rate differential with the US and the UK. The euro cannot afford another episode of US dollar strength because of its suggestions for price stability, the primary objective of the central bank’s existence. In 2022, between Lagarde thinking about it and Powell raising rates, the euro depreciated significantly from 1.2 to just over 0.95 dollars at which it moved. Since then it has recovered to almost 1.1 units. In addition to the collapse of precious energy, especially in gas, the rise of the euro and its strength in the exchange rate with the dollar is decisive as a medicine against inflation. It has already demonstrated in the past its role as a shield against any episode of instability or threat that will occur outside the borders of the union, such as the debt crisis in the United Kingdom (October 2022) and banks in the US (March 2023). ) ). But the euro must be helped to remain strong and right now it needs higher rates so as not to fall too far behind.
Entering the Cape of Storms and the swell in the euro-dollar | Opinion of Rubén J. Lapetra
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