Fed may close Brazil’s window of opportunity sooner
U.S. Federal Reserve Chairman Jerome Powell told the U.S. Senate Banking Committee this week that the country’s economic data came in “stronger than expected” in January, “which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”
- On Friday, he learned that the country’s labor market continues to post blockbuster gains, confirming his comments a few days earlier.
Late to the party. Having lagged behind the contractionary wave, the Fed has had to adopt an atypically aggressive monetary policy stance since the start of the tightening cycle 12 months ago. The results didn’t start to show until September 2022.
Why it matters. After Mr. Powell’s speech, traders in the futures market priced in a half-percentage-point hike at the Fed’s March 22 meeting.
- CME Group’s FedWatch tool now indicates a 68.3 percent probability that the central bank will raise its benchmark overnight interest rate to a range of 5 percent to 5.25 percent, from the current 4.5 percent to 4.75 percent range. Before Mr. Powell’s remarks, that probability was just below 30 percent.
- A strong January doesn’t mean a strong year. Still, what Mr. Powell did — and how analysts read it — was to set the table for higher and possibly faster rate hikes.
What it means. For Brazil, the window of opportunity may be closing sooner than expected. Fears of a global recession reduce investors’...
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