Shares registered a decline last Tuesday, marking a moment of caution in the market after a recovery phase seen in November. This movement came to light as the market anxiously awaited the results of Nvidia, a giant in the AI chip segment, and assimilated the recent deliberations of the Federal Reserve, the central bank of the United States.
The benchmark S&P 500 Index (GSPC) closed down 0.2% after the stock index closed at its highest level since August. The tech-heavy Dow Jones Industrial Average (DJI) and Nasdaq Composite (IXIC) fell about 0.2% and 0.6%, respectively.
The release of the minutes of the last Fed meeting on interest rates. The document revealed a consensus among members of the Federal Open Market Committee (FOMC): the need to maintain a restrictive monetary policy for longer to combat persistent inflation.
According to the minutes of the meeting, which covered the period from October 30 to November, all FOMC participants agreed that “it would be appropriate for policy to remain in a restrictive position for some time until inflation is clearly moving in a sustainable direction.” to the Committee’s objective.”
This consensus resulted in interest rates remaining in the range of 5.25% to 5.50%, the highest in 22 years. This decision reflects the Fed’s careful approach to inflation that, although showing signs of cooling, still remains above the 2% target established by the institution.
October’s Consumer Price Index (CPI) brought a mixed outlook. Although it indicated a stabilization of prices from the previous month and an annual slowdown to 3.2%, it still reflects inflation significantly above the Fed’s target. Excluding the most volatile items such as food and gas, core inflation still stood at 4.0% in October, below the September rate.
Despite investors’ positive reaction to the CPI report, inflation continued to be a concern. The combination of stubbornly high inflation and a still tense job market reinforces the Fed’s cautious stance.
FOMC members have emphasized the need for more data to assess progress in reducing inflation. If the numbers do not confirm a disinflation trend, further rate increases may be considered.
“Participants expected that data arriving in the coming months would help clarify the extent to which the disinflation process was continuing, aggregate demand was moderating in the face of tighter financial and credit conditions, and labor markets were achieving better balance between demand and supply”, highlighted the minutes.
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