São Paulo – The Central Bank of the United States, aka Federal Reserve (Fed), has decided this Wednesday (18th) that it will maintain its stimulus to the country’s economy over the next few months. The monetary authority has announced in a communiqué that it will await further evidence that economic activity is picking up in sustained fashion prior to withdrawing the incentives granted in the wake of the 2008 crisis.
The actions which will be maintained include the purchasing of US$ 40 billion in mortgage-backed securities and of another US$ 45 billion in US treasury securities. In early August, the Fed had signalled that the United States economy was showing signs of recovery, and thus incentive measures could be withdrawn.
Anticipations that the Fed was going to cease to inject US$ 85 billion into the economy each month caused the dollar to hike against other currencies, especially those of emerging countries. In August, the dollar appreciated by nearly 5% against the Brazilian real. Following this Tuesday’s announcement that stimulus would be maintained, the US dollar was selling for R$ 2.188 by 4:46 pm, down 3.178% from Tuesday (17th).
The Fed now expects the US’ Gross Domestic Product (GDP) to be up from 2% to 2.3% this year. The prior estimate, made in June, was of an increase of up to 2.6%. For 2014, the Fed is expecting a GDP ranging from 2.9% and 3.1%. The prior estimate for 2014 was that the country’s GDP could increase by up to 3.5% next year.
The interest rate will be maintained at the current level, from 0% to 0.25% a year until early 2015 at least. The Fed believes raising interest rates will only be feasible once the unemployment rate is down to 6.5% or less. By August, unemployment stood at 7.3%.
*Translated by Gabriel Pomerancblum
