The Fed has kept its key interest rate – RBC

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Federal Reserve The US has left its benchmark interest rate unchanged. Comment regulator may increase investors’ appetite for risk
 

long pause

Wednesday evening, March 16, Operations Committee on the open market the US Federal Reserve completed a two-day meeting, the results of which decided to leave the base interest rate at the same level – 0.25-0.5%. In December last year, the first time the Fed raised its key rate by 25 basis points in 2006, citing the fact that the US economy has strengthened enough to start normalizing monetary policy. The Fed chief Janet Yellen at the December press conference hinted at the possibility of further rate hikes in 2016, but during the first two meetings in 2016 the Fed was unable to continue the normalization of policy.

«Information received since the last meeting Fed in January, shows that the rate of economic growth remains moderate, “- said the American regulator. Inflation is increasing, but remains below the target value of 2%, while the global economic development and financial markets continue to pose a risk, the Fed said. In particular, the acceleration of the growth of inflation prevent low commodity prices.

In January, the Fed noted that when deciding on further normalization of monetary policy will be guided first and foremost the rate of inflation growth, the data on the labor market and the state . world economy

«published a few hours before the completion of the meeting of the inflation data support the policy tightening in the second half of the year inflation close to the target value of 2%. Close to targets and indicators of official employment, “- said the chief expert of the Center for Economic Forecasting Gazprombank Yegor Susin. The US unemployment rate held at 4.9% in February, near the mark that indicates full employment

«Against tightening said weak economic growth, a bad situation in the industry -. In February, industrial production declined by 0.5%, consumer demand remains weak and companies are working at the warehouse, “- continues to Susin. The limiting factor remains the state of the world economy, he added.

The markets on Wednesday assessed the probability of a rate hike just 4% and almost no reaction to the US regulator’s decision. US stock index S & amp; P throughout the day declined, but soon after the session up 0.5%, to 2023 points. The euro immediately after the Fed decision rose by 0.7% against the dollar, to 1.12 dollars. / Euro. Brent crude on the decision of the American regulator has broken through the level of $ 40 per barrel, rising by 2.5% to the opening level. At the Moscow Stock Exchange the dollar fell by almost ruble to 69.6 rubles. / USD., Which is 1.4% below the opening level.

Pending hints

The main interest is not the Fed’s decision itself – almost no one expected a rate hike at today’s meeting, and the comments of the American regulator head Janet Yellen, said the chief economist at Alfa Bank, Natalia Orlova. “This is the first meeting after the decision of the European Central Bank to lower its key rate to zero, and it is important to understand whether the Fed respond to changing policy of the European regulator”, – says Orlov.

According to a new statement, the Fed’s forecast assumes average two rate hikes in 2016 against four enhancements that controller predicted in December. “Markets are set to some easing by the Fed and the change in the Fed’s plans mean that we are back to the old song, when central banks are returning to loose monetary policy, and risk appetite will recover,” – she adds

Of interest are, and the updated macroeconomic forecasts, which published the Fed, the analyst on macroeconomic policies in the global markets, “VTB Capital” Neil MacKinnon. The main idea of ​​the January statement was the fact that economic activity will continue to grow at a moderate pace, and labor market indicators continue to improve. With regard to inflation, it was said that it “is expected to remain low in the short term,” but will return to the 2 percent target level over time. “Since the US stock markets rebounded, oil prices rose and credit spreads narrowed. Inflation expectations have stopped falling. US economic indicators have generally improved, and the labor market situation has stabilized, “- explains McKinnon

According to the new forecast, the forecast on the growth of US GDP was reduced from December’s 2.4 to 2.2% forecast. inflation was reduced from 1.6 to 1.2%, the regulator said in a statement. The forecast for unemployment maintained at 4,7%.

After the December Fed meeting investors began to count on four further increase during 2016, but due to the volatility in the financial markets and the uncertain prospects for the global economy at the beginning of the year they had much to temper their expectations, reminds McKinnon. Now the federal funds rate futures market to price in about a 50 percent probability that the rate will be raised by 25 bps at the June meeting.