The Federal Reserve authorities plan to reduce the interest rate of another 0.50 percentage points this year, after making a cut of 0.25 points on Wednesday, based on the median of the new projections.
However, the last quarterly summary of the economic projections of the Fed showed a large disagreement within the United States Central Bank.
The median of expectations on another 0.5 points of cuts was higher than that considered three months ago, when the labor market seemed stronger and before the President of the United States Donald Trump appoints a new member of the Council.
Wednesday’s Fed decision had the only divergence of the most recent director of Fed Stephen Miran, Trump’s economic consultant.
The document with the expectations for the interest rate does not inform which authority has done what prediction.
But it indicates that one of the 19, probably a president of the regional Fed Bank without voting, on the right, thought that the modest cut of Wednesday was also inappropriate. The highest point of the projections indicated a preference for a basic rate of 4.4% at the end of this year, above the post-reunion interval from 4.00% to 4.25%.
At the other end of the spectrum, a Miran, probably, that wanted a cut of 0.50 points at the time of the meeting on Wednesday a basic rate of 2.9% at the end of the year.
The projections showed that six members did not foresee any other cuts this year, two thought that it would only be necessary for another point 0.25 percentages and that nine authorities were in the median of two other cuts of 0.25 percentage points of interest until the end of the year.
From the last projection of the June Fed, a dramatic drop in monthly earnings, an increase in the unemployment rate to 4.3% and a few signs of large price pressures deriving from the Trump rates convinced most of the authorities to support the current monetary policy, even if the concerns for inflation have made more hesitant.
The median vision of the authorities for each of the next two years includes new cuts of 0.25 percentage points every year. The predictions for the rate at the end of next year varied from 2.6% to 3.9%.
In the meantime, the median forecast is an unemployment rate of 4.5% in December and a rate of 4.4% at the end of next year.
The inflation for metric inflation addressed by the Fed – the 12 -month variation in the PCE index – ends at 3.0% this year, the same as that scheduled for June, before going to 2.6% next year.
The authorities provide that the Core PCE, which he uses to evaluate future inflation, will end at 3.1% this year and 2.6% next year. The Fed aims at 2%inflation.
Source: Terra
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