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Opening of the Federal Reserve meeting amid turmoil in the banking sector

Opening of the Federal Reserve meeting amid turmoil in the banking sector

(Photo: Getty Images)

Washington, – The US central bank began its meeting on Tuesday, at a time when the banking sector is still affected by the turmoil, with the stated desire to continue to combat inflation, which is declining but is still well above the target.

A central bank spokesman told AFP that the Monetary Policy Committee meeting “started at 10:00 am as planned.”

Fed officials in recent weeks have made no secret of the need to continue raising interest rates, which currently range between 4.75% and 5%, in order to keep pressure on prices and return inflation towards the 2% target.

However, according to the Personal Consumption Expenditure Index, which takes into account the Fed, inflation in March, although it was down, remained at 4.2%. Moreover, core inflation, that is, excluding energy and food prices and which is specifically monitored by the institution, was 4.7%.

Markets overwhelmingly expect a quarter-point increase, or 25 basis points, but the decision will only be known on Wednesday and will be followed by a press conference by Federal Reserve Chairman Jerome Powell.

The meeting comes against an increasingly bleak economic backdrop, with growth slowing in the first quarter to just 0.3% from the previous quarter and 1.1% year-on-year.

Moreover, the possibility of a slight recession during the next two quarters is less and less doubtful for the majority of analysts, who expect a recovery only in the last quarter of this year.

All this in a financial context marked by the bankruptcy of a new institution, First Republic, which was bought over the weekend by the number one company in the sector, JPMorgan Chase, after the control of the federal authorities.

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This is the bank’s third failure since mid-March, after Silicon Valley Bank (SVB) and Signature, but it is also one of the largest banks, by assets under control, in American history.

Two reports published on Friday by banking regulators concluded that the defeat of US institutions is linked to mismanagement of risks by their management and errors in their supervision.

But their decline has also been driven by the rapid rise in interest rates initiated last year by the US central bank (Fed), which has mechanically reduced the value of fixed-rate assets.