July 29, 2020
Interest rates latest publications
As expected, the Fed left interest rates unchanged and reaffirmed its commitment to, at a minimum, maintaining the current pace of asset purchases while also defending its expanded use of its lending powers until the economy is on the road to recovery.
Before the outbreak of the COVID-19 crisis and the impact of the lockdown measures (which is still not possible to quantify in full), Spanish banks were already facing an environment in which it was widely accepted that the profitability of the system would be, at best, limited.
Corporate financial distress is a condition experienced by companies under pressure to service their debt due to one or more factors such as overindebtedness, an increase in borrowing costs, challenges rolling over maturing debt due to tighter financial conditions or a decline in revenues.
Banxico still has a very inappropriate restrictive monetary policy stance. Banxico should cut the policy rate by at least 75bp; the odds of a milder 50bp cut are not low, but we expect Banxico to take a bolder step and cut rates 75bp to 5.25%.
April’s FOMC statement, released today, confirms that the Federal Reserve (Fed) will continue with its aggressive strategy to deal with the economic fallout and downside risks.
The economy is suffering from an unprecedented health crisis caused by COVID-19. Although some countries were able to, most could not control the initial outbreak of the infection and were forced to confine people to their homes and partially or completely lockdown non-essential economic activities.
In July 2019, the US officially achieved the largest economic expansion since records began. This growth continued in spite of the obstacles encountered as a result of the trade war with China and the global industrial recession.
In an unscheduled and abbreviated statement, the Fed announced an emergency 50bp cut to 1-1.25% in the Fed Funds rate, similar to the response to 9/11.