On the eve of the US currency fell sharply against the backdrop of the fact that the US Federal Reserve System (FRS), the US left the interest rates unchanged and hinted at the lack of plans to raise them in 2019. Today, the dollar index is recovering after reaching its lowest level since the beginning of February.
At the moment, the regulator is going to keep the interest rate unchanged this year and increase it once in 2020.
According to experts, if everything is exactly like this, then this will be a landmark moment. Since the 1970s, the Fed has kept the rate three times stable for more than a year after its increase in the previous three months: in 1997, 2000, 2006. At the same time, the next step of the Central Bank was almost always a reduction in the rate.
"The Fed has given the markets even more than they could count on," Goldman Sachs experts stated.
As we can recall, the consensus forecast of economists suggested that at least one rate increase by the Fed will still be this year.
"For 2020, the US Central Bank still laying another increase in the rate, which, according to the forecast, will be the last. However, given the upcoming US presidential elections and the almost guaranteed attempts by Donald Trump to raise his rating at the expense of criticism from the Fed, this seems unlikely, " the representatives of ING believe.
Meanwhile, market expectations have become even more "dovish." Therefore, futures traders raised their estimate of the probability of a rate reduction to almost 50% this year.
Today, many probably wonder: why has the regulator decided to change his rhetoric so drastically?
It is possible that everything will be tied to the already mentioned presidential elections in the United States now, although there is still a lot of time left to them. The head of the White House, obviously, knows that by tradition, only those presidents under which the stock market showed growth, could succeed in electing for a second term. Thus, the Fed must do everything possible for that. In addition, to improve economic performance, the United States is likely to need a weaker dollar to improve economic performance.
The material has been provided by InstaForex Company - www.instaforex.com