The Fed admits the possibility of a moderate recession in US this year
According to the minutes of the last Federal Reserve (FED) meeting, some members of the FED have lowered their expectations for interest rates for the year, following the collapse of several US banks. The FED expressed their intention to closely monitor the consequences of the banking crisis on the US economy. The meeting, held on March 21-22, occurred shortly after the fall of Silicon Valley bank. During the meeting, the FED raised the federal funds rate by 25 basis points, bringing the range to 4.75-5% per annum. This decision was made unanimously by the FOMC and aligned with most economists’ and analysts’ forecasts.
However, not all members of the FOMC expressed confidence in the need for another rate hike in May, as they wanted to wait for new data on the impact of the banking crisis on the economy. The FRS stressed the need to maintain flexibility in determining the appropriate course of monetary policy, given the high uncertainty of the economic forecast. The published median forecast of Fed chiefs shows that the rate will be about 5.1% per annum by the end of 2023, which is consistent with December expectations.
Despite news of problems with large banks, the FED did not increase their expectations for the rate level, instead returning to their original prediction. However, the Fed managers now admit the possibility of a moderate recession in the American economy later this year, considering developments in the banking sector. They expect that the country’s economy will increase by 0.4% by the end of the current year, and 1.2% in 2024. Nonetheless, they note that the risks for the forecast are biased for the worse.
March inflation in the US slowed to 5%
According to data from the US Ministry of Labor, the Consumer Price Index (CPI) rose by 5% in comparison to the same month in the previous year. This marks a decline from February’s inflation rate of 6%, and represents the lowest rate of inflation since May of 2021. Analysts had anticipated a slowdown to 5.1%. Energy prices experienced a decline of 6.4% last month, reversing the 5.2% increase seen in February. Gasoline prices saw a steep decrease of 17.4%. Food prices, on the other hand, rose by 8.5% in March, a slight decrease from the previous month’s increase of 9.5%. Used car prices fell by 11.6% in March, compared to a drop of 13.6% in February. In March, the CPI increased by 0.1% compared to the previous month, which is lower than the 0.4% growth seen in February. Experts had predicted a 0.2% increase. However, consumer prices excluding food and energy prices (Core CPI) increased to 5.6% year-on-year, up from 5.5% in February, matching market expectations. On a monthly basis, the Core CPI is expected to increase by 0.4%, down from the 0.5% increase seen in the previous month.
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