Thursday, March 28

Goldman Sachs warned investors about the impact that the Fed’s rate hike will have on the markets


The team of economists Goldman Sachs expressed their concern in a report issued to their investors about the future changes in the interest rate that the FED will carry out starting in March, and expect that the US monetary authority will not advance in three increases in the rate, as expected over the past month, but instead take an even more aggressive approach leading to a total of four increases over the year.

The team in charge of analyzing local and international economic variables within Goldman Sachs, They estimated that there will be four rises in the interest rate in the following months until the end of the year: March, June, September and December. In addition, they reported that as of July, the United States monetary authority will begin to reduce its portfolio of bonds and assets.

What effect will it have on the markets?

The rise in interest rates by the Fed will have a “vacuuming” effect in the world since it is most likely that capital will leave emerging countries – such as Argentina – and generate devaluation pressure on the exchange rate.

China seems to be carrying out a more aggressive strategy, and has focused on trying to contain the pressure on the growth rate of the Asian giant’s economy through a series of measures that seek to stimulate the economy. First, the central bank of China has acted by reducing the reference interest rate, which has a downward impact on the interest rate for commercial banks, and with this, it seeks to encourage investment to through a reduction in the opportunity cost of credit.

On the other hand, last week, China advanced in the reduction of the interest rate for the credits of all natural persons, aiming to grow the economy through an incentive to consumption, but experts believe that it will not be enough.

In the euro zone, the economy is also driving the talks. With strong rises in the inflation rate (around 5%), Christine Lagarde, Head of the ECB stated that the situation is “different” than in the US. Inflation is “clearly weaker” in the eurozone, while the region’s economic recovery is also not as advanced as in the United States, he pointed out in his usual conference last week.

“We have every reason not to react as quickly and abruptly as we might imagine the Fed would,” Lagarde said. “But we have started to respond, and of course we are prepared to respond with monetary policy if the numbers, data and facts require it.”

The ECB has come under pressure to act after inflation in the currency bloc hit a record 5% last month. But nevertheless, Although officials have agreed to scale back stimulus put in place during the pandemic, they say raising interest rates this year is highly unlikely as the current bout of inflation is fueled by supply shocks and rising housing costs. energy, and should gradually decrease.



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