If, relatively recently, most analysts, in fact, were 100% likely to expect the American Central Bank to raise interest rates at the December meeting, now opinions are divided.
Some experts believe that the regulator should refrain from raising rates, having cooled the expectations of markets for further monetary tightening.
As one of the reasons why today's rate increase is called into question, is the fact that the Fed over the past 24 years has never raised the rate during the collapse of stock indices. On the contrary, it usually happened against the background of their growth. Another point, in the previous cycles of tightening monetary policy, in 1999 and 2004, the Central Bank raised the rate only if the market estimated the probability of this step 1 day before the decision was 70% or higher. Now, this figure is at 68%.
According to another point of view, the Fed should not deviate from its plans for tightening next year, because a sharp change in the Central Bank's attitude can finally undermine Jerome Powell's confidence and demonstrate that the regulator can be easily unsettled only by increasing market volatility.
The best option, apparently, is a cautious rate increase, which will weaken expectations regarding the prospects for normalizing monetary policy and show that the Central Bank rate is becoming increasingly dependent on incoming macroeconomic data, as was the case with B. Bernanke and J. Yellen. However, whether such a move can calm the markets is unclear.
As for the US currency, given the pessimistic expectations, the possible weakening of the dollar following the results of the next Fed meeting is likely to be limited. Meanwhile, if the regulator even hints at a rate increase in 2019, albeit at a more modest pace, the "American" may even be somewhat stronger.
The material has been provided by InstaForex Company - www.instaforex.com