By Arlenys Tabare
The last meeting of the Federal Reserve headed by Jerome Powell took place on March 18, where it was announced that interest rates would remain unchanged days after the conflict in the Middle East began, which to date has skyrocketed oil and gasoline prices, once again driving inflation above 3%.
And given the current circumstances with latent political and economic uncertainty, in addition to forecasts of a possible global recession if the war in Iran continues, economists believe that the FED will maintain the same position as in its previous meeting.
For the president of the Federal Reserve Bank of Chicago, Austan Goolsbee, “the possibilities of an outbreak of stagflation derived from high oil prices before tariff inflation disappears, will lead the American consumer to give up and say they have no confidencewhich is going to start accumulating its money and which would lead us to an anti-inflationary recession; “That would be the worst scenario,” he said.
Goolsbee’s comments come after, in a press conference, Powell downplayed stagflation, pointing out that the term could only be used in more serious circumstances than the current ones; However, Goolsbee believes otherwise.
For her part, Sue Hill, director of the government liquidity group at Federated Hermes, an international investment manager, believes that “Continued uncertainty around the Strait of Hormuz reinforces the need for the Federal Reserve to stay on the sidelinescertainly for the next meeting and, in all likelihood, for many months afterward,” he said.
In the last meeting, Powell expressed that it was still too early to know the effects that the war would have on the US and world economy, but he did not rule out that by the end of the year inflation could skyrocket, mainly affecting consumers.
The Organization for Economic Cooperation and Development (OECD) It also raised its estimates of inflation in the United States to the highest levels for this year, placing it above 4%.
And he warned in the analysis that “the extent and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will significantly increase business costs and raise consumer inflation, with adverse consequences for growth,” he said.
On the other hand, Goolsbee believes that the unemployment rate will also remain above 4%, Therefore, like other economists, he considers that for the FED meeting scheduled for this Wednesday, April 29, interest rates will remain unchanged in a range of between 3.5% and 3.75%.
Keep reading:
- US consumer confidence falls to historic lows in April
- US business activity rebounds in April amid higher prices due to war in Iran
- The war between the United States and Iran will not only increase the price of gasoline; other products will also increase in price
- Rising gas prices are causing more Americans to work from home, survey says
