This week the United States Federal Reserve (Fed) announced a 0.25% increase in its interest rate, the first increase reported since 2018.
The measure is a turn in the monetary politics of the Fed, which had kept the cost of money almost at zero since the start of the covid-19 pandemic, with the aim of mitigating high US inflation.
Before this increase was announced the International Monetary Fund (IMF) he had warned that emerging economies should prepare for interest rate hikes in the United States.
But what effects will this measure have on the economy of Latin America?
A BBC Mundo report warns that this increase in interest rates for United States might affect the lives of millions of people in developing countries.
The professor of Economics at the IE Business School (Spain), Juan Carlos Martínez, specified that the measure will generate inflationary pressures and a loss of value of the currencies of the countries of the region.
“There is more risk that capital that was invested in Latin America will go to the United States, causing a depreciation of local currencies and a greater inflation“, dijo a BBC.
The Fed’s decision might accelerate an outflow of capital from Latin America towards the United States, seeking higher yields, as large investors will consider buying more US bonds, seeing them as a more attractive asset.
This will imply that they lend less money to the countries of the region or “buy debt” from interests Taller.
Furthermore, it will make the dollar price rises to higher levels, reducing the purchasing power of people when they buy goods that are imported or that contain imported inputs in their production.
“If the central banks of the region want to prevent capital from migrating to United States, what they have to do is aggressively raise interest rates. The problem is that higher rates are a brake on growth,” explained Martínez.
It is worth mentioning that only in the case of Peru, the Central Reserve Bank (BCR) has already raised the interest rate in the last eight months, reaching 4%, which implies that the entities of the financial system also raise their interest rates and make credits more expensive.
For analysts, this 2022 will be a year of progressive increase in interest rates in different countries of the world, also taking into account the uncertainty caused by the war between Russia and Ukraine.
This risk makes capital try to take refuge in the dollarwhich implies a depreciation for the other currencies.
According to a study by BBVA Research, with the Fed’s monetary adjustments, the dollar in Peru might range between S/ 4 and S/ 4.10 by the end of 2022.
A reduction in the balance of the Fed would cause the rate of the American treasury bonds to increase, attracting capital from investors placed in emerging economies like Peru and, depreciate the sun, they indicated.
In general, this situation would further hit the economy of Latin Americawhich is still affected by the effects of the pandemic such as job losses, low growth, lower fiscal resources due to extraordinary expenses made during the recession, and high inflation.
