The most predicted economic depression in recent times has yet to occur. This has been stated by the president of the US Federal Reserve (FED), Jerome Powell, who has just announced how his gloomy forecast from a year ago turns into confirmation of moderate growth for the remainder of 2023. All this supported by the latest data that includes a Stock market rise of around 30% since October 2022an unemployment rate at historic lows and a good pace of consumer spending.
To this we must add that the prices of daily use products such as food and gasoline have stabilized or fallen, reducing the worrying inflation that had caused the rise in interest rates by the FED. This was the case until a few days ago, with the announcement of the promotion of federal funds, last Wednesday, to 5’5%. Some increases that begin to see their end after the confirmation of the economic strength of the United States by experts.
There were many economists who ensured the arrival of a national recession and, consequently, also an international one. A probability up to 73% was given by some experts from both the private and public sectors. Especially by those who are part of the US central bank who, overwhelmed by the rise in prices caused by the pandemic and the war in Ukraine, decided to raise interest rates to control inflation.
Despite the problem that this has caused for the economy of American families, the rate of both citizen consumption and hiring by employers has reactivated once again. And this has led the Fed to consider starting to lower interest rates, which would give consumers even greater relief.
Causes and interest rates
What the experts are wondering, however, is how the situation could have evolved in this way. According to him Wall Street Journalan important element in the strength of consumption may be that many Americans were able to secure mortgages and other types of loans with low interest rates, precisely because of the alert given by specialized agencies, before the rise in interest rates.
These increases have been maintained, by the FED, since March 2022 until reaching the 5’5% actual, the steepest rate of increase in four decades. Something that is expected to begin to decline from next September.
Last June was a turning point for the rise in prices. With a slowdown greater than expected in recent weeks and a moderate annual increase of 3’1%figures have been reached that have not been seen since 2021. Although the FED has the objective of leaving inflation at 2%, the data invites optimism.
These data, together with the confidence transmitted by the controlling organisms, have provoked the euphoria of Wall Street with a rise in bonds and shares. And not only in the United States, the European Central Bank (ECB) has also joined the party with a recent and confident speech by its president, Christine Lagarde.
But not everything is good news at an economic level. The political battle over the country’s debt limit between Democrats and Republicans in Congress is cause for concern. The credit rating agency Fitch Ratings has just downgraded the US credit rating from AAA to AA+with which he loses the highest grade, for the first time in ten years.
The causes are “expected fiscal deterioration over the next three years, a high and growing public debt burden, and the erosion of governance relative to their AA and AAA rated peers over the past two decades, which has manifested in repeated blockades of the debt limit and last-minute resolutions”, according to the agency through a announcement. An element that must be taken into account in the short and medium term to assess the economic evolution of the country.
