The leadership of the Federal reserve system (the fed) keeps plans a gradual increase in the key rate, however, may delay their implementation due to the difficult situation on the market, reports Bloomberg referring to the statement by the fed chair Janet Yellen, published on the eve of her appearance before the Committee on financial services of the U.S. Congress.
“Financial conditions in the U.S. more recently are less fit to raise [rates]”, — reads the statement Yellen, published on the website of the fed.
The fed explained that meant falling prices for a number of shares, the increase in interest rates on loans and strengthening of the dollar. According to Yellen, if these trends are persistent, they can affect the forecast the fed regarding the prospects of the dynamics of the level of economic activity and unemployment in the United States.
“The course of our monetary policy in any case is not hard-coded in advance. In fact, our actions will depend on how new information will affect the assessment of the prospects of the economy, we will regularly evaluate the key rate necessary to achieve and maintain maximum employment and inflation of 2%. We will adjust our policy so that market conditions are in line with our objectives in the long term,” explained Yellen.
In the middle of December 2015 the fed for the first time since 2006 raised its key interest rate by 0.25 percentage points, establishing it at the level of 0.25–0.5%. The reason for the rate hike by the fed called U.S. economic recovery, as indicated by data on unemployment and inflation. Later it was claimed that the fed may continue to raise rates, however, at the meeting of January 27, it was left unchanged.
Ahead of today’s Yellen’s speech before Congress (will start at 18.00 GMT), analysts said that it may affect the situation in the markets.
“The volatility in the market may force Janet Yellen to hint at what the plans of the fed rate hike will be made pause. If these words sound, then the dollar will be under pressure, and risky assets will be in demand, which, of course, will have a positive impact on Russian assets,” said analyst “Discovery Broker” Andrei Kochetkov.
“The main event of the day for global markets — Yellen in the U.S. Congress. Futures Federal funds estimate the probability of a rate hike in 2016, just like 30%, so we can hardly expect that the fed will “run ahead” train financial expectations, as long as she did not show rigidity in views on the rate increase”, — stated in the report of the Bank VTB 24.
Earlier expert “AI Ti invest” Vasily Oleinik said that four times increase in 2016 key rate, as had been predicted earlier, the fed can’t.
“Too much begins to push strong dollar on all American goods. The market has now been laid for a rate hike this year up to a maximum of 1%, i.e. a two-fold increase of 0.25%, although more realistic looks are now only one increase per year on the same at 0.25%. If the fed Chairman this week will really expressing concern about the state of the U.S. economy, it will be well received by all stock markets,” — said the expert.
In early February, the investment Bank Goldman Sachs released a forecast according to which in 2016 the fed will raise its key interest rate three times. Thus in March the fed will have to pause because of uncertainty prevailing in the U.S. market.