Fed to raise discount rate in June

Fed to raise discount rate in June
USD exchange rate will begin to strengthen after discount rate reaches 2%

Baku. 4 May. REPORT.AZ/ The US Federal Reserve System (Fed) yesterday as expected at a meeting, has not changed discount rate and confirmed it at the level of 0,75-1%.

Report informs citing the, Fed spoke about the importance of raising interest rates in June.

Fed didn’t give importance to weak growth in the US economy, noting that it is a temporary phenomenon. According to Fed, situation in the labor market is good.

Also, Fed reminded that consumer spending is at desired level in the country, investments in commercial enterprises increased and inflation is approaching 2% target.

Analytical Group of Report News Agency informs, taking into account Fed’s statements it will probably increase discount rate at June meeting. Relatively weak economic indicators before the next meeting will not prevent it from increasing interest rates at next meeting on June 13-14. Analytical Group noting that currently, the real interest rate shows minus 1% in the US. Thus, the inflation rate is close to 2%, the Fed's interest rate is below 1%. This could have a negative impact on financial markets, in particular, the exchange rate of the dollar. Therefore, Fed is expected to raise interest rates to 2% level soon. Until then dollar is not expected to strengthen at the global currency market. Dollar exchange rate will begin to rise after Fed’s rate exceeds 2%. During this period, the stock market and commodity prices will remain stable. While the oil price expected to fluctuate between $ 45-60/barrel.

Before June meeting, dollar will relatively strengthen, then will depreciate after the increase in the discount rate. A significant change in the dollar rate not expected in a year.

The main currency pair the euro/dollar exchange rate will fluctuate between 1,04-1,10 USD/EUR.

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