Let us remember that the Americans say about their guide to action before the bidding.
Fed officials asked five key indicators that may affect the interest rate:
1) The target inflation rate of 2%.
2) The target unemployment rate of 5%.
3) A low rate puts pressure on the profitability of banks on loans.
4) The dollar exchange rate.
5) The volatility of the markets.
According to the latest speeches Janet Yellen, the inflation rate below 2%, but it is increasing, and as long as everything goes according to the forecast. They expect to reach a level of 2% in a few years. It's all according to forecasts. This indicator says it is not necessary to change the rate because they omit it can not, and uplifting, if you believe the old school of the economy, strengthen the dollar, which makes imported goods cheaper. And it's not like the Fed, as the spoils of America domestic market and stops the development of its economy. Americans buy foreign goods, and not their own. Also, the increase in rates could potentially lead to a decline in purchases of goods durables due to the rise in price of credits. It is also more expensive credit could potentially reduce the flow of investment, which would entail an increase in unemployment, which, as we say on one of the two most difficult indicators for which employees Fed watching very closely. It is worth noting that oil sags, and out of this situation is not visible yet. Falling oil prices - is becoming cheaper energy and fuel, which again stops inflation.
Summary of inflation. If you follow only the inflation, the rate should be lower, but since she and so at historic lows, this can not be done simply and rate should be left alone. If China and Asia as a whole would show significant growth, one would expect that they will begin to raise the prices for their goods, and after that it would be possible to consider the possibility of increasing rates, but China is growing very slowly, at the rate we have to wait. In addition, oil has fallen below all forecasts. This is an important moment. This figure, which pulls out the purposes and may affect a promise to raise rates, if all goes according to the forecast.
America's economy is expanding and unemployment is now the target levels, but the growth rate lower than estimated. And generate new jobs is becoming increasingly difficult. To generate the jobs necessary to the expansion of existing or establishment of new enterprises. This requires attractive loans, low interest rates.They are now, and so to a minimum. If rates increase, it is hypothetically reduce the availability of credit. But we must understand that the current, minimum, value rates give some freedom to maneuver. If the rate increase is insignificant, it is unlikely to deter major borrowers. In order to attract investment and support business has a lot of tools. This tax breaks and discounts on the costs of state regulation, and much more. You can raise the rate slightly and raise its Americans really want.
Summary unemployment. Would not it greatly increases the cost of credit, but there is such an opportunity.
The low value of the interest rate reduces the potential impact on the banking sector in the event of a crisis + low value of the real (effective) rate reduces the income of banks on overnight loans.
You've got to understand what interest rate the Federal Reserve, to be more precise "target value of the interest rate the Federal Reserve federal funds." Interest rates in general - is a tool to influence, first of all, to the real (effective) interbank rates. Real interbank rate - the average interest rates at which banks offer to loan their surplus funds for short periods, usually overnight and tend to other banks. These tools work in different countries in different ways and we do not have enough space here to discuss all of them. If we talk specifically about the Fed, the Fed sets the target federal funds rate. That is not a clear value as, for example, the discount rate the Fed, namely the target. This value should be read as the percentage by which the Fed would like the banks to give each other money in the short-term loan. Affect the value Fed could in two ways.
1) Pouring money supply in the market and subtracting it.
2) Very rarely changing interest rates. This is usually the critical steps, this not now. When the Fed "pumps" money market (buying government bonds through the Bank of New York) rates fall when Bates (selling government bonds through the Bank of New York), the rates go up.
Realizing the above, we can see that the low rates of target values give a very low return on bank lending. This is one of the main banking income. It is understandable why the Fed wants to reach 5-7% in this index.Previously, the Fed lowered the rate to combat the crisis, making it more profitable lending businesses. And the banks were to lend to businesses and not to the market and not lending to each other for market operations.Now there is the growth of the US economy, and banks are losing borrowers. In addition, when the stakes are high and there is a crisis of the banking sector, the Fed could lower it, which will allow banks to capitalize at the expense of other banks more briskly. Or, in extreme cases, to lower the discount rate and the banks through the discount window dokapitaliziruyutsya. When the rate at zero, this is not possible. And if the banking crisis breaks out, it will burn out by itself with the removal of small and medium banks.
Summary of the banking sector. It is necessary to improve. It is good, that there was no crisis yet, but count on it for life does not have to the same banking lobby in Congress, one of the strongest. And it will raise them, but the other figures in this text say it will be difficult and long.
With the rate things are old. It was announced by the theory, that due to the fall in raw materials, the dollar began to play the role of reserve currencies. As long as investors do not understand the situation, they kept their money, without the risk to enter the market, and keep them, of course, in dollars. I think that now the investors decide where to invest, and perhaps will soon get rid of dollars and invest in various sectors of the economy. This will require the exchange of currencies. But is the situation with the oil. Prices fell more than expected. Therefore, there is a risk that the dollar will grow on its own. And it's bad for the Fed. They will deal with it. And, of course, the rate is now is too early to change.
Summary of the exchange rate. Given that the Fed wants to raise rates when the Fed raising rates representatives should not create a drive for the appreciation of the dollar. Therefore, the easiest option - raise substantially below forecasts. Other options I can not see.
It was mentioned that the Americans do not want to create volatility in the markets. How can they reduce volatility? I see only one option. Volatility creates those who believe in, or raising the rate unchanged. Like all disappoint? I see one conclusion - raise is insignificant, but the priority for the Fed will remain the dollar.
VERDICT. Taking for granted everything said Yellen, and a little thought, I see an increase in rates by a small amount. My guess - is likely to leave rates, but if you raise, then the value from 0.5 to 0.15. At the same time it will raise them in the belief that the dollar will not go up. But all this has effect only if you believe Yellen. It is easy to imagine that they will not pay attention to the volatility. Fed officials have warned us that they will not tolerate the dollar as a reserve currency. And maybe get tired of waiting and they can once again all the bite everyone to understand.
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