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Fed decision becomes less predictable - ANALYSIS

Fed decision becomes less predictable - ANALYSIS
Market expectations for increase of interest rate will be around 50% on the eve of every Fed meeting

Baku. 1 March. REPORT.AZ/ The US Federal Reserve (Fed) is expected to raise interest rate on March 14-15 with 52 percent probability.

Report informs, expectations were at 50 percent on February 27. Probability rate hiked up to 70 percent after statements of San Francisco and New York Fed presidents yesterday before dropping down by 18 percent today.

Report's expert group believes, market’s expectations for increase of interest rate will be around 50 percent on the eve of every Fed meeting. In such circumstances USD exchange rate, commodity prices and world financial markets will not face abrupt changes.

Decision to increase interest rate will supposedly have a short-term effect. Such circumstances will ease pressure on Fed before any decision. As a result, USD rate and oil prices are expected to keep stability, while gold prices is likely to drop. Fed is expected to raise interest rate this year maximum in three steps to reach 1.5 from current 0.75 percent. This has already been reflected in USD exchange rate, which gained ground against its main rival Euro by 34.3% hiking to 1.054 USD/EUR from lowest 1.6039USD/EUR recorded in July 2008.

Report’s expert group also believes that dollar will not see substantial parity with Euro unless Fed increases interest rate to 2 percent. Next remarkable rise in USD exchange rate will take place in second quarter of 2018. Fed is expected to increase interest rate to 6.7 percent by year 2022. This can establish USD/EUR rate at 0.82-0.85.  

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