The fed expects to stabilize oil prices, but does not return to its previous heights

The fed expects to stabilize oil prices, but does not return to its previous heights

WASHINGTON, December 16. /Corr. Andrew Shitov/. The Federal reserve expects to stabilize oil prices, but does not return to its previous heights.

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The fed chief Janet Yellen confirmed this at a press conference following the meeting of the governing body of the fed open market Committee.

“I think there is a limit below which oil prices are unlikely to fall,’ she continued. – If you look at market expectations, we expect markets to stabilize prices and then a gradual upward movement. Of course, I recognize that we saw a number of shocks that have led to their decline. And we are not waiting for their return to their former heights, but only stabilization”.

“I was surprised by the further decline in oil prices”

The fed chief also said that he was surprised by the further decline in oil prices.

The fall of quotations Brent from the highs of June 2014 close to 70%. On Wednesday, the cost of futures for oil of mark Brent with delivery in January 2016 on the stock exchange ICE in London fell by 3.3% to $37,19 per barrel. This is the lowest level since December 2008.

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For comparison, in December 2008 the price of Brent crude fell to $36,58 per barrel, down 75% in five months.

“I was surprised by the further decline in oil prices. All you need now is a stabilization of oil prices,” said Janet Yellen, commenting on the impact of lower oil prices on inflation.

According to Yellen, the stabilization of oil prices is necessary in order to soften the impact on inflation, which in December forecast the fed will remain below 2% until 2018. The fed’s target inflation to around 2%.

Two tasks

Dual mandate the fed implies that the regulator sets himself two tasks simultaneously: the maintenance of maximum employment and price stability. And if unemployment, the fed was able to cope well (in September the unemployment rate held steady at 5.1 percent – the lowest level since April 2008), inflation is the most complicated. In September in the USA and was registered deflation of 0.2% compared with August.

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The U.S. Federal reserve raised benchmark interest rate to 0,25-0,5%

Federal reserve system (FRS) that perform the functions of the Central Bank of the country, has decided to raise the benchmark interest rate by 25 b.p. to 0.25-0.5% 0-0,25% per annum.

Basic discount rate the fed last raised in June 2006. From December 2008 to date it has remained almost at zero – 0-0,25%.

The fed chief Janet Yellen in the press conference noted that further rate increases will be gradual. It is expected that by the end of 2016 the rate will reach 1.5%, and by the end of 2017 and 2.5%.

The fed chief warned that if the pace of economic growth will slow down, then rate hikes could be more gradual.

in 2020, then the tendency to a slight further increase. Such data are contained in the annual report of the International energy Agency (IEA) World Energy Outlook 2015, which was presented in the Italian capital.

“We foresee price increases to $80 per barrel. But, of course, it cannot be excluded that the price of oil will remain at current low levels. And that would have implications for the oil market and the global economy. The IEA believes that keeping the price at $40-50 per barrel in the coming years, despite the benefits for consumers could be a problem,” said the Executive Director of the Agency, Fatih Birol.

According to him, the persistence of low oil prices will have a negative impact on the U.S., which will decrease the production of shale oil, will also hurt the economies of Brazil, African countries, Russia. Moreover, the persistence of low oil prices will reduce investment in the sector.

According to the forecast of experts of the Agency, by 2020 the demand will increase and will reach an average of nearly a million barrels a day. But since 2040, this growth will stop under the influence of rising prices, development of alternative energy sources, and reduce investment in unstream more than 20% in 2015.