«In 2023 over 5%) – Corriere.it

Everything went according to the predictions of the eve. After no less than 4 consecutive increases in the cost of money equal to 0.75%, yesterday the Fed moderated the tone of its restrictive monetary policy by deciding on a 0.50% rate increase. At this point, the target rate range for the Fed Funds moved to 4.25%-4.5% from the previous 3.75%-4%. These are the decisions at the end of the last meeting of the FOMC, the Federal Open Market Committee, the operating arm of the Fed, which was held yesterday. The decision comes after the inflation rate recorded a significant slowdown in November, with growth of 0.1% compared to the previous month and 7.1% on an annual basis, significantly down on the +7.7% in month of October. A clear sign that the restrictive monetary policy is starting to bear fruit in terms of fighting inflation.

However, the increase in the cost of money is holding back economic growth and yesterday the American central bank updated its estimates on the trend of GDP in the United States downwards, which should stop at +0.5% in 2023 (a clear decrease compared to to +1.2% expected in September) while the adjustment for 2024 is only marginal (+1.6% against +1.7%). Instead, +1.8% for 2025 was confirmed.

As for the rate path, the expected peak is 5.1% in 2023, in practice with an increase of 100 points compared to current levels. A drop will follow which should bring them back to 2.9% in 2025 (ie with more than 200 points of cuts). We are strongly committed to bringing inflation back towards the 2% target, Federal Reserve Chairman Jerome Powell said, adding that we are not yet on a sufficiently restrictive line and therefore raising rates further will be appropriate. Now the most important question is no longer the speed with which interest rates rise but the duration for which they will be kept at a restrictive level.

Obviously these words did not please Wall Street which turns negative fearing that the monetary tightening will last longer than expected. The Dow Jones lost 0.3% one hour after the close and the Nasdaq down 0.5%.