Friday, 29 July 2022 14:35

FED raises interest rates to 0.75% but SSF affirms that the impact on El Salvador will be targeted

Written by Evelyn Alas

Yesterday the Federal Reserve of the United States (FED), raised interest rates again by 0.75% in its fight against the clock to curb historic levels of inflation.

This means that in El Salvador the interest on bank loans will increase its value, but the Superintendencia del Sistema Financiero (SSF), assured a few days ago through a statement that this increase will have a focused impact because the strength of the salvadoran banking system is supported by local funding.

This is the first time in its modern history that the FED raises interest rates twice in a row by three quarters of a percentage point, something that seemed very far away only six months ago.

According to the Superintendency, as of may 31, 2022, the total funding of the country's banks amounted to US$20,473.9 million, of which 91.6% corresponds to internal funding and 8.4% to external funding.

Of that 8.4%, which comes from foreign loans, only 4.05% derives from US funding sources, which, according to the regulatory institution, will have a lesser impact on domestic banks, since only that percentage could experience an increase in rates.

At the conclusion of its july monetary policy meeting yesterday, wednesday, the members of the Federal Reserve approved the considerable increase.

And this action emphasizes the extent to which the Fed is willing to boost the economy to moderate rising costs for Americans amid the highest price increases since the 1980s.

Funding is when a person, business, project or any institution gets the financing it needs.