Increase of US dollar to continue - FORECAST

Increase of US dollar negatively impacts gold and oil markets

Baku. 31 March. REPORT.AZ/ Head of the Federal Reserve System (FRS) Janet Yellen has announced that they will not wait to achieve the inflation target to increase the interest rate. Report informs, speaking at a meeting of the Federal Open Market Committee (FOMC) in San Francisco J.Yellen noted that the discount rate will be increased in stages over several years. If economic conditions permit, the process will begin later this year.

J.Yellen added that, if fails to raise rates, it is associated with economic risks, and to carry out the first step, they will not wait for achieving or approaching the target level of inflation: "If you wait to achieve the level of unemployment or inflation target, we will be forced dramatically increase the interest rate. It will frighten investors and lead to lower economic growth pace and unemployment. In turn, the low level of interest rates for a long time will force investors to take risks beyond measure and, as a result, will be disrupted financial stability. "

Currently, discount rate in the US is at a historic low (0.25%).

Before the meeting in San Francisco, inflation was considered an important factor in raising rates. At this meeting J.Yellen noted, more significant unemployment and wage are growing. The next FOMC meeting is scheduled for April 28-29. However, up to this meeting raising of interest rates is expected.

After these statements, in anticipation of higher interest rates the US dollar began to strengthen against other currencies. Weakened against the Euro to the level of 1.1050, US dollar strengthened to 1,08 USD / EUR. While in Azerbaijan, the official exchange rate of the dollar against AZN was little changed, the euro against AZN decreased from 1.14 to 1,13 AZN / EUR.

Increasing of US dollar on world markets adversely affects the gold and oil markets. The cost of an ounce of gold, which reached 1 205.7 dollars now dropped to 1,182 dollars. The price of Brent crude first rose to $ 59, then dropped to $ 56 per barrel.

Chairman of the Central Bank of Azerbaijan Republic (CBAR) Elman Rustamov said, even with the price of oil at $55, the country's income will be reduced by 5 times, and when the level to below 50 dollars, a year will end with a balance of payments deficit.

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