The Federal Reserve of the United States (Fed) has decided to maintain interest rates, although it has left the door open to undertake new increases before the end of the year, which would be added to the eleven consecutive increases it has made since March last year.

"The Committee would be willing to adjust the monetary policy stance as appropriate if risks arise that may prevent the achievement of its objectives," said the US central bank, which has chosen to keep rates in the current range of 5.25% and 5.5%, its highest level since 2001.

The decision has been taken in full marathon of meetings of three of the most important central banks in the world, decisive for the progress of interest rates in their economies.

The monetary policy marathon starts today, with the Federal Reserve giving a truce in its tightening of monetary policy, which means leaving US rates between 5.25% and 5.5%, their highest level in 17 years, since before the 'subprime mortgage' crisis. It follows tomorrow the Bank of England, who is expected to raise them by a quarter of a point, to 5.5%. On Friday, the Bank of Japan will leave short rates at -0.1%, even though inflation in that country has exceeded the official target of 2%.

The key to today's meeting of the 'Fed' will not be so much the decision not to touch the rates – totally discounted by the market – as the growth and inflation forecasts of the members of the Open Market Committee, which is the central bank body that decides monetary policy. The 'dotted line' will focus the market's attention, as will the press conference of the central bank chairman, Jay Powell, after the meeting.

Although it is assumed that Powell will announce the maintenance of monetary policy "dependent on the data", what the market wants to know is where the Fed thinks that data will go. The US is at virtually full employment – something the Fed believes pushes up wages – and the economy continues to expand despite monetary tightening, the largest in four decades. However, inflation is reluctant to fall below 3%, one point above the central bank's target.

Those words can have much more impact on the market and generate more volatility than the decision to hold rates. The market will try to interpret what the central bank intends to do at its next meetings, in November and December, and when it will start easing monetary policy. The Fed has indicated that the rate cut will be slower than usual.

Hedge funds have massively taken leveraged – i.e. on credit – positions in Treasuries and Treasury bond options. These positions may be very vulnerable if financing conditions tighten as a result of Powell's words or the 'dotted line' forecasts.

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  • Articles Pablo Pardo