The risks of the decision of the American regulator for the Russian economy are named
The US Federal Reserve raised the discount rate by 0.25 percentage points at once, and now the upper limit of the rate range exact values of the indicator, but ranges) reached 5.5%. This level is a record since the beginning of the 21st century, or rather, since the attacks on the twin towers of the World Trade Center in New York (2001). The increase in the Fed's discount rate has already become the 11th since the beginning of last year, and this is a kind of absolute record.
What are the consequences of the decision of the US Federal Reserve on the rate for the American, global and Russian financial systems, Mark Goykhman, an analyst at the Capital Skills Academy of Finance, Candidate of Economic Sciences, told MK.
— The US Federal Reserve System has been struggling with strong inflation in the country for a long time. For this, one of the most important tools – The interest rate at which the central bank (Fed) lends to commercial banks. This is not just a percentage, but wider – an indicator of the value of money in the economy, a benchmark for the return on investment. If it rises, then banks raise interest on loans and deposits, and bonds of the state and companies give higher yields. And then the outflow of money from the consumer and investment markets is stimulated. This prevents pumping up demand and rising prices. This is an exemplary mechanism for counteracting inflation. It is used by many central banks. Recall that in July the Bank of Russia raised its key rate from 7.5% immediately to 8.5% — precisely because of increased inflation.
— The increase in the Fed rate from 5.25% to 5.5% does not look sharp. This value was assumed by the market in advance. Moreover, investors believe that this increase may be the last in a rate hike cycle. After all, the Fed has raised it 11 times since 2022, from 0.25%. And now it is expected that next year, 2024, the regulator will move to reduce it, since inflation is already significantly reduced – to 3% from highs of 8.5% in the summer of 2022. Based on such considerations, the reaction of the market is also manifested, which seeks to orient to the future.
— With the usual increase in the rate, the rise in the cost of loans is a factor in reducing profitability and business volumes, economic growth, demand and prices for resources, stock indices, and appreciation of the national currency. However, now the current consequences – others. Since such an increase in the rate was predicted, it was included in the quotes in advance, this did not surprise the market. And if it finally doesn’t grow any more, then maybe the worsening of conditions is already behind us. And you have to live in anticipation of a future rate cut.
Therefore, after the Fed's verdict, the reaction of investors was positive. The S&P 500 stock index is not going down, but is growing, being at the highs since April 2022. And the dollar against major currencies, on the contrary, does not rise in price, but becomes cheaper. Oil, in turn, is full of optimism and steadfastly holds above $83 per barrel of Brent.
— In general, yes. Although these consequences are indirect. The optimism of the markets contributes to the support of Russian assets. The Moscow Exchange index is rising, storming the sacramental milestone of 3000 points, where it has not been since February 21, 2022. Against the backdrop of a weakening dollar in the world and rising oil prices, the ruble feels quite calm at the level of 90 per dollar.
— For the next few months, risks remain due to the increase in the Fed rate. After all, until the regulator starts reducing it, a high percentage slows down economic activity and investment in production. There is still a possibility of a recession, that is, a decline in the economy in the United States. And since the States – the leading producer and consumer of goods in the world, and the dollar – the main world currency, then these processes can result in a negative for the global economy. Especially as other major central banks are raising their rates to counteract inflation. And if a general economic slowdown in the world manifests itself, this will undermine the demand for resources and other Russian export goods, and will be a factor of pressure on our economy, the stock market, the ruble exchange rate.