The report of the last policy meeting of the US Federal Reserve makes clear what we already knew: after a long bull cycle, which culminated in a 0.25% increase in key interest rates in May, establishing the main one between 5.0% and 5.25%, they are not sure of the need to stay on the path of increases.
This hesitation seems logical. The current level of key interest rates aligns with the forecasts published by the Fed last March. Therefore, the indicators would have to differ from the scenario the Fed envisaged for its projections to be adapted. This is not the case at the moment, but the macroeconomic scenario uncertainty is significant and exacerbated by factors that the Fed did not necessarily rely on.
On the one hand, the crisis affecting the banking sector - particularly the regional banks - is resulting in tighter credit conditions for consumers and businesses. Ultimately, its impact is similar to that which a further increase in key interest rates would cause. Added to this are the endless negotiations around raising the debt ceiling, which add another dose of unwelcome turbulence at a time when the Fed is trying to reach a soft landing.
At the same time, monetary policy acts with an inevitable delay. The impact of any change in key interest rates takes time to translate into changes in credit conditions, savings, investment and spending, and ultimately the real economy. Therefore, the fear of doing too much is essential, especially when investors are putting pressure on rates to fall before the end of the year. A scenario that still seems unlikely unless the economy experiences a sudden deterioration following a shock (such as a possible default).
In the face of so many unknowns, the members of the Monetary Policy Committee wish, above all, not to exclude any option, offering themselves the maximum leeway to cope with the situation in the light of developments in economic indicators.
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