G20 Economies Adjusting To Delays In Fed Rate Cut: Know More Here

G20 Economies Adjusting To Delays In Fed Rate Cut: Know More Here

According to Brazil’s finance leaders on Thursday, G20 finance ministers and governors of central banks are preparing for the possibility of a later beginning to U.S. interest rate cuts, which has led to global asset repricing and underscored the need for debt talks.

G20 Economies Adjusting To Delays In Fed Rate Cut: Know More Here
G20 Economies Adjusting To Delays In Fed Rate Cut: Know More Here

The shift in expectations following the United States higher-than-expected March inflation readings has tempered sentiment about several economic variables, including a global repricing of assets, according to Finance Minister Fernando Haddad, who made this statement at a press conference following a meeting of the Group of 20 finance leaders in Washington.

Haddad further pointed out that despite popular expectations that rate cuts in the greatest economy in the world will start in the first half of this year, the U.S. central bank’s communication could be more consistent.

“When the March (inflation data) scare came, there was a drastic reversal of expectations, and this changed the mood significantly regarding how economic variables will behave worldwide,” he said.
“Everything else depends somewhat on this.”
Roberto Campos Neto, the head of Brazil’s central bank, said at the same press conference that coincided with the IMF and World Bank’s spring meetings that the current situation has caused the US dollar to strengthen, which he described as “always a problem” that may cause policymakers to take action.
However, he pointed out that compared to other nations, Brazil’s debt is less impacted by this development, and the country’s central bank only becomes involved in the foreign exchange market when anything goes wrong.

In response to anticipation that the Federal Reserve could maintain high U.S. interest rates for an extended period, Campos Neto stated that caution and waiting were important.

He was asked if he had abandoned the forward guidance previously given of another 50 basis-point interest rate decrease at the Brazilian central bank’s next policy meeting in May. “Depending on the path (that unfolds), we will have a reaction function, I cannot anticipate what will happen,” he replied.

Haddad added that talks for possible restructuring and assistance to nations are more urgent because many G20 countries have debt in dollars that is impacted by fluctuations in US interest rates.

“All of this will need to be done with greater speed, greater agility, and perhaps new sources of funding,” he said. “There have been discussions about new contributions to countries, especially for concessional loans … at a time when interest rates make debt servicing unaffordable.”

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