EDF | How do the Fed's interest rates affect the Peruvian economy? | Privacy Policy | Peru



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On Wednesday, June 19, the meeting of the Monetary Policy Committee of the O Federal Reserve (Fed) two U.S. In him agreed to maintain the interest rate in a range between 2.25% and 2.5%.

However, he pointed out that I could cut during the year up to half a percentage point to respond to growing economic uncertainty and the reduction in inflation expectations from 1.8% to 1.5%.

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This decision would have several impacts on the international markets, the decisions of the investors and also on the Peruvian economy.

MARKET REACTIONS

Daniel Córdova, vice president of variable income research Credicorp CapitalHe said to The trade that the market has already internalized the news, and even several analysts from abroad have increased the probability, almost 100%, that effectively the Fed cut its interest rate next month.

"That generated that today, several stock indexes have risen sharply, and US Treasury debt rates have fallen, some of them, to levels that have not been seen for a few months," Cordova said.

On the other hand, Sebastián Cruz, senior analyst of Renta SAB Seminar, agreed that this last meeting gave a clearer message that the Federal Reserve does not rule out reducing its rate.

He also added that the market has already anticipated to this possibility for one month, which has intensified trade tensions between the United States and China; and also some comments from Fed members.

He also saw a reduction in the US Treasury rate of 50 basis points in about a month, which responds to investors positioning themselves in bonds ahead of future rate reductions.

DISCOVERED GROWTH AND OPPORTUNITIES FOR PERU

According to Cruz, "the reduction of the Fed rate anticipates a lower rate of global growth and the United States in the coming years."

In addition, this will lead to a drop in dollar yields that will encourage investors to seek higher returns in foreign positions and with greater macroeconomic stability, such as Peru.

Cordova, meanwhile, said that "a reduction in the Fed rate will confirm fears that the world economy is slowing down."

This would mean that the demand for foreign securities, not foreign currencies for the dollar will be appreciated. That would be beneficial for Peru, given that there would be a greater appetite for Peruvian titles, while the sun would gain value.

"On the growth side, we would see lower US investments in the country [Perú] given that an economic cycle of contraction is arriving in that country after 10 years of continuous growth, "said Cruz.

"The impact can be positive for both stocks in emerging markets and fixed income instruments, including Peruvian bonds, we could expect a greater demand for them," Cordova concluded.

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