How close is the United States to a recession? | Economie

The annual rate of inflation in the United States in May rose to 8.6%, the highest level in 40 years, driven mainly by the increase in global fuel and food prices. This, in addition, could lead to a much sharper interest rate hike by the Federal Reserve (FED).

That’s what analysts expect, said Hugo Perea, president of BBVA Research, adding that this forecast will generate significant volatility in global financial markets today. With this, global economic growth will be affected.

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“It is discounted that the interest rate will rise for the rest of the year, the issue is how much more. Beria noted that short-term interest rate futures indicate strong increases for the remainder of the year.

Hugo Periya Head of BBVA Research

Luis Fernando Allegria, macroeconomic analyst at Seminario SAB, noted that economic agents in the United States, fearful that the Fed will adjust too quickly, are concerned that it will end up causing Recession in the north of the country.

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recession

Beria explained it The analogy is with what happened in the seventies, when there was an increase in the price of oil, inflation Central banks in advanced economies rose and were slow to react. When they did, they had to raise interest rates dramatically, and that in the United States, in the early ’80s, translated into Recession Very strong.

“In this environment, given the potential for a strong Fed adjustment, there is some concern [por una posible recesión] “It is not the central scenario, but it is a risk scenario, where global growth is affected and traded in the markets,” Berea said.

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Thus, he explained that the first short-term reaction is taking place in the financial markets, which anticipate greater risks that the scenario of slow growth will finally materialize next year, and secondly, we will have low growth with high. inflation This will mean that emerging economies have less support than larger economies.

“World trade and exports will decrease, and less capital will enter the region (Latin America). They are effects in the event of a scenario of relative stagnation of the US economy”he added.

Based on data from inflation Expecting the Fed to raise the interest rate by 75 basis points at once, Allegria made it clear that the entity would no longer be calm with its monetary policy, and to fully apply the brakes in terms of inflation Cooling down the economy too quickly will mean a country Recession.

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local consequences

As for Beria, if the scenario of stronger Fed increases occurs, the financial conditions of the Peruvian economy, and the whole world, especially emerging economies, will be less favorable.

“When a company or the government itself borrows in international markets, interest rates will be higher”pointed out.

The short-term effect, Allegria said, is that the dollar is strengthening against other currencies because if the Fed raises the rate too much, it will make it more attractive to invest in dollar assets.

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“The exchange rate is affected and it goes up for us. However, this is offset in part because, with the entry in dollars that we have for exports that are doing well thanks to higher commodity prices, a credit is created”

Luis Fernando Allegria, Macroeconomic Analyst at Seminario SAB

He further explained that if the US economy enters RecessionAs this is an important trading partner of Peru, non-traditional exports such as textiles and agro-industries may be affected.

Currently, in general, all stock markets are suffering from the consequences of this perception of risk that the Fed decides to raise the benchmark interest rate quickly and aggressively, enhancing the possibility of Recession.

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