Friday, July 1

It is difficult to justify that there is going to be an inflationary spiral

– This week we are going to know the quarterly GDP, which could remain as it is at 2.1%, and business results, consumer confidence from the Conference Board for December or home sales for November will also be published …

In terms of home sales, we saw a significant recovery from the lowest moment we had this year, we may not be close to the peak of what was 2020 and it is a very good sign. What we see is that the US economy is recovering strongly.

– Regarding last week’s news, the most important thing was the Federal Reserve’s decision to tighten the monetary policy forced by the inflation that is being seen in the US. A twist on President Jerome Powell’s speech throughout this year. How do you rate the decisions made by the Fed?

The Fed adapted the speech to the inflationary reality, but without committing to shorten the stimulus until the employment figures, which is 50% of the Fed’s mandate, reach the numbers that they consider important. The discourse turned towards what they say here hawkish – harsher -, but in the actions, all they did is say that what they planned to do in the second half of 2022 they will do before. In recent weeks the Federal Reserve had come under a lot of pressure after the inflation figures and Powell took out the word “transitory” when he spoke of inflation and this was interpreted in the markets as he was going to see a much stronger turn, the commitment to shorten tapering, which is the monthly reduction of the purchase of bonds. My vision is that the Fed had a hawkish speech and actions that do not change anything and also reserve the right to continue stimulating the economy because we are still far from full post-pandemic recovery. At the beginning of the year, one of the risks was having new strains of the pandemic, we have had them and we have them again but in a much more resistant economy.

– Powell has avoided saying when interest rates will be raised, what are the forecasts for next year?

For next year the Federal Reserve estimated on the dot plot, which is the consensus of what the members of the Federal Open Market Committee think, two to three increases of 0.25 percentage points. The dot plot is not an upward commitment or anything like that, it is the member’s opinion of where they think interest rates will end at the end of the year. There is no commitment and the vision is that if everything continues as it has been up to now, they will be able to raise rates at a slightly faster rate.

– Last week we also learned that the retail sales for November have slowed down their expansion and we also learned about the manufacturing PMI and the services PMI for the month of December, which have fallen and the prices of production that have increased, which seem to have not been liked by the market. What do these data reflect on the US economy?

Retail consumption is affected by seasonality issues because many of the purchases that are accounted for in November, may have been made in October due to rumors that there was going to be a shortage and I would not see products to give away at Christmas. It is a fairly modest slowdown that does not seem to indicate a slowdown in the economy and the figures for the economy are good in all areas, in fact the Federal Reserve did not interpret it that way because otherwise it would not have made that hawkish speech, but the data from producer prices that the market saw as a sign of inflation. It was a high rise, of 11%, although these figures are late because they are justified by all the problems of the production chains that we had during 2020. Many people believe that these problems are going to dissipate this year and inflation is Very affected by the 2020 base scenario, if in 2021 we do not have this base scenario, it will be carried over to 2022. That would be normal because the prices of second-hand cars or products like that will not go up to infinity. It is difficult to justify that there is going to be an inflationary spiral.

– What summary do you make of this 2021 in the markets and the US economy and what do you expect from 2022?

The US economy in 2021 grew a lot, with a growth of 6% -5.5% GDP was expected to reach 8% if there were no new strains. By 2022 we will surely see a slowdown from these figures to 4.5%, which is still very strong growth within a healthy economy with some inflationary pressures, but which is not from a demand point of view. There are supply problems, but labor costs are not increasing. We have a Federal Reserve that is very sensitive to employment figures. In general, I am positive, we have treatments and vaccines for Covid, we know how to react … This experience makes the shock that we may have less.

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