Another pause of the Fed may be less effective than three years ago.


According to representatives of the Federal Reserve System (FRS) of the USA, the current situation resembles the events of three years ago, when uncertainty about the growth prospects of the global economy kept financial markets in tension for several months.

At present, the regulator is forced to balance between the obligation to keep inflation under control and the desire to prevent the country's economy from slipping into recession. In 2016, he succeeded. Then the American Central Bank was set to raise the interest rate four times. However, the collapse of stock markets prevented these plans from being realized. As a result, the rate remained unchanged most of the year, and the Fed decided to raise it only in December by 0.25%.

According to experts, although the regulator still has the opportunity to take a pause in the cycle of tightening monetary policy, this time it may not have such a calming effect as it did three years ago.

"In 2016, the US economy was able to survive the" turbulence" in the market, and the United States recorded the second longest period of GDP growth in history. But now the Fed cannot afford to rely only on the so-called "automatic stabilizer," analysts said.

"The Fed entered in 2019, predicting two interest rate hikes, although its decline this year becomes more likely. However, the regulator is unlikely to go for it. Meanwhile, Congress was once again at an impasse, and the trade war between the United States and the Middle Kingdom intensifies uncertainty. And although the White House believes that the weakness of the economy of the Middle Kingdom makes Beijing be active in negotiations, the consequences for the United States may be no less sad, especially since the American monetary and fiscal stimuli will gradually disappear. And let the next storming of the resistance level at $ 1.1480 has not yielded a result yet, the "bulls" on the euro still hope to bring the EUR / USD pair to a new operational space," they added.

The material has been provided by InstaForex Company -