Tuesday , January 31 2023

What does this mean that the US raised interest rates and what impact this decision has on Argentina?


It was the expected news, but it did not cease to have an impact, both in the US, where it happened, and in the rest of the world. The federal reserve of that country (the Fed) raises interest rates in a decision that has shaken the markets.

Although this is the fourth increase in the year – some of the presidents Donald Trump described as "stupid" ideas -, The Fed has provided clear signals that it will calibrate the rate of future increases in these rates, references to loans and loans.

In short, A measure such as this improves the US deposit terms and makes investments that are in the world, especially in emerging markets (like Argentina), return to that square. Something that is known as fly to cook, or "return to quality". In addition, the dollar is valued, and other currencies are weakened. So simple, it's complicated for countries with unstable economic and financial variables.

In particular, the Monetary Policy Commission (FOMC) decided unanimously to bring what economists call "a careful jump" increasing the range of rates by 0.25 percentage points from 2.5% to the ceiling.

At the local level, analysts were consulted Infobae they are talking about the "singing fact" that still has an impact, and they point out the future downward trend.

"Finally, the rate shifted, there was a 64% chance that this would happen, although there has been an increase in the number of people and institutions who think that this will not happen at this December Fed meeting. So, the initial interaction reaction of the market, which was then partly corrected, "he said Gustavo Neff, from a research for a trader. "The market consortium, even, is talking about a rise in the coming October (although it's officially talking about two). But volatility is still high, by more than 25%, and everything can happen. You have to wait a few days to see how it decanted, "he warned.

"On the one hand, growth in the markets has been reduced and the impact has already taken place, it will not be a novelty, but it is still a bad news that they are growing, which means that the Fed absorbs the dollar and that is, less liquidity in global markets and less access to the purchase of Argentine public securities, for example, "he said. Fausto Spotorno, Ferreres & Asociados.

"In this sense, we are one of the most vulnerable and weak countries, we are in the group of countries most vulnerable, perhaps with Turkey and some others, but not many, and are not very relevant, which is why the country's risk is also high: The market sees us at risk and punishes us. At the level of the Government, that is the impact that is foreseen in the projections and against which it can no longer be done than it was done: go to the IMF"he explained Infobae.

For his part, a financial analyst Christian Buteler It agrees that the news is not a surprise. "It was expected, but even the first reaction was negative for the markets. Same, everything is closed here and the real reactions will come tomorrow, surely. This puts a little more noise on the market, but my concern focuses more on local issues that do not cause any reaction. There was + 2% here and we ended up in less than 1% above. The impact was, "he said.

Federico Furiase, Eco Go, is optimistic because it believes that although the rate was increased on the Internet than expected on the market, the Fed expected a slower rate of growth for 2019 and 2020.

"Instead of making three growth next year, it will do two, in line with the completion rate of 2.9-3%, and one from 3.1% by 2020, when it was previously 3.4%. Now, FED rate projections are more in line with what was discussed at futures exchanges and with a theoretical neutral interest rate of zero percent"He noted in detail that this is good news for bonds and for the local exchange market.

And also, according to Furiase, it can be relieved by the Central Bank "which is trying to stabilize the dollar and expect inflation with falling rates. If the Fed is going slower in the cycle of increasing the rate than expected, it is a favorable wind for the country's risk, local bonds and the exchange market of Argentina ".

"This range has been discounted, but the Fed's message to space more, perhaps, the remaining increase is a novelty, it would be important for us In the coming years there will be higher liquidity and investors will not be so selective. It also generates fewer turbulence and global fears. The less, the better, "he says. Aldo Abram, freedom and progress. "Given the level of domestic activity, there could be more opportunities for international financing, which we do not have today, but also for some private investments and bets on domestic financial assets," he explained.

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