The big week of June for central banks is approaching and managers are placing their bets on the future of monetary policy. With less than seven days to go before the verdict of the US Federal Reserve, the long-awaited pause in interest rates has begun to turn into a possible rise. This is what Natixis IM believes, since they see more sense in executing the latest increase in reference money rates now instead of stopping and then having to increase them again.
In a presentation on investment trends and macroeconomic prospects, Nicolás Malagardis has defended that the decision would give him more capacity to act as he knows the macroeconomic data for the second quarter. 339,000 jobs during the fifth month of the year, well above the forecasts of analysts who pointed to 190,000 jobs, according to the market consensus, and represents its twenty-ninth consecutive monthly rise.
This situates the unemployment rate at 3.7%, slightly above the estimate of 3.5%, but still close to its lowest level since 1969. The good progress of the labor market contrasts with the evolution of activity that is already showing symptoms of slowdown. GDP for the first quarter moderated its increase to 1.3% during the first quarter of the year, also above the 1.1% expected by analysts after the economy contracted in the final stretch of 2022. However, without annualizing the data was 0.3%, three tenths lower in quarter-on-quarter terms. In the absence of knowing the data for May, the explosion fell below 5% in April.
On the other side of the Atlantic, the European Central Bank lags somewhat further behind after starting to pull the trigger on rates four months later. In this sense, the French manager expects to carry out at least two other increases, without specifying how much they will be. Last May, the Frankfurt-based agency raised them by 25 basis points, to 3.75%, with the conviction that this gives it greater room for maneuver to act in the future. The CPI has already been reduced to pre-war levels, down to 6.1%. The problem continues to be the underlying rate -which excludes fresh food and energy- which has risen three tenths to 5.6%.
In this context, they have emphasized that “something may be wrong” in the monetary policy transmission mechanism, as business margins remain high. Despite this, they have emphasized the slowdown in activity in all regions, especially in the euro zone. This is observed in the manufacturing activity of the Asian giant, which has moderated as a result of this lower global and internal demand, since the Chinese consumer is characterized by being a great saver, who allocates that money to the real estate market. In any case, I think the recession could hit by the end of this year or the beginning of 2024.