Currencies in Latin America: What was the impact of the new Fed rate hike?

After meeting for two days to discuss monetary policy, the United States Federal Reserve (Fed) announced on Wednesday a new increase of 75 basis points in its interest rate, which left the range between 3.75% and 4%. Given this, the markets in Latin America had an impact.

The fed raised the interest rates three-quarters of a percentage point in its fight against the worst inflation in 40 years, but noted that future increases in borrowing costs will be made in smaller steps, to assess the “accumulated tightening of monetary policy.”

The president of the fedJerome Powell said that the change of pace could come as soon as the next central bank meeting in December, but also warned that there remains great uncertainty about the level of interest rates and that they could end up being higher than what had been estimated in September.

The time to reassess the pace of rate hikes “is coming,” Powell said at his news conference following the Federal Open Market Committee’s decision to raise rates for the fourth consecutive meeting.

The Argentine market closed on Wednesday with the peso down 0.20%, at 157.59/157.60 per dollar in depreciation regulated by the central bank, while the Merval stock index fell 2.41%, at 149,309.36 units, due to profit taking one day after an intraday record.

Operators agree that the Argentine stock market has become a good opportunity to hedge against inflation and the devaluation that hits the third largest economy in Latin America.

That same day, the Chilean peso rose 0.21% to 941.50/941.80 units per dollar. Meanwhile, the leading index of the Santiago Stock Exchange, the IPSA, gained a slight 0.02%, to 5,194.66 points.

The Chilean economy contracted 0.4% year-on-year in September amid the decline in trade and manufacturing, the Central Bank reported.

The Colombian currency closed yesterday the session with a rise of 0.22% to 5.003 units per dollar, overcoming after marking a new record low of 5,038.50 units in the morning, while the MSCICOLCAP stock index ended with a drop of 0, 74% to 1,245.10 points.

The Peruvian sol rose 0.87% to 3.945/3.9525 per dollar, while the benchmark on the Lima Stock Exchange fell 0.88% to 550.28 units.

The Brazilian and Mexican markets were closed on Wednesday due to local holidays.

With information from Reuters