Uncertainty in global markets aggravated after a referendum in the UK, threatens to radically change the strategy of the us fed to raise its key rate. This prevents the Agency Bloomberg, citing data from stock trading and the analysts. The publication predicts that the next fed rate hike should be expected in this year or even next, but at least in January 2018. This conclusion is Bloomberg doing on the basis of the price of Eurodollar futures.
These market derivatives in fact mean Bank deposits in U.S. dollars that are located outside of the States. Over the decades the use of Eurodollar futures and options on them have become a popular means of risk insurance (hedging) against sudden interest rate changes of Central banks.
The explosive growth in the value of these futures on the Chicago stock exchange after the announcement of the British referendum is indicative, according to the newspaper, investors fear for the fate of the key rate of the fed. Accordingly, the probability of its improvement by September 2016 fell in may 80% to less than 5%.
On the contrary, the probability of a rate cut of fed to the beginning of autumn took off last Friday to 40%, and now holds near 25%. More than two thirds of the traders now believe that changes in rates by September (that is, over the next two meetings of the Committee of the fed) to wait is not worth.
In the end, writes Bloomberg, the interest rate hike by the American regulator may not happen until January 31, 2018 is the most distant from scheduled meetings of the Committee FRS on operations on the open market (FOMC), which takes such decisions.
“Now the market puts on a nontrivial probability of cutting rates in the coming months, told Bloomberg expert BMO Capital Aaron Coley. — The fed is now furnished on all sides, and traders are unlikely until mid-2017 seriously laid on the increase.
That Brexit will negatively impact on the prospects of fed rate hike these days, said Russian experts. So, the economist of alpha Bank Natalia Orlova argued that the rate increase would indeed be deferred, and this will eventually increase the interest of players to risky assets. The expert of the company “Aton” Konstantin Glazov also noted the sentiment in favor of abandoning the fed rate hike, after which the bonds of developing countries would be even more attractive.
The last time (and first time for ten years), the fed raised the base rate in December last year by 25bps.p. to 0,25 — 0,5%. The previous FOMC meeting two weeks ago, it is the leadership of the regulator drew attention to the slowdown in inflation and weak extension of the labour market. Without improvement in these indicators increase the base rate of the fed refuses.