Unchanged  

Foto Yahoo

By Isaac Cohen*

The decision adopted last week by the central bank of the United States, known as the Federal Reserve, to leave unchanged the federal funds interest rate did not stir the financial markets. Contrary to expectations, even the announcement that there may be only one interest rate reduction during the rest of this year did not alter the steady climb of the stock market and contributed to a rally in bond prices.

It helped that, on the morning of the last day of the central bank meeting, it was announced that the consumer price index was flat in May, which interrupted the increasing trend in inflation of this year’s first quarter. Also, the next day, the Labor Department announced that the producer price index decreased 0.2 percent in May, from April, another indication of declining inflation.

However, according to Jeff Sommer in The New York Times (06/16/24), what explains the markets indifference is because they have been rising “on the backs of giants.”  It is the technological revolution derived from artificial intelligence that has propelled the market value of a few companies, such as Nvidia, Meta and Alphabet. Additionally, a rally in bond prices is pushing down the yield of 10-year Treasuries, which has a positive effect on mortgages and housing.

*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.

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