How the Fed rate will affect the ruble until the end of the year. Bet on an increase. What will happen to the dollar after the Fed’s decision? What does an increase in the Fed rate entail?

This will drop the "wooden" to 70 per dollar

Federal backup system The US decided to raise the base interest rate by 0.25 percentage points. Now interest in the dollar as an investment instrument will increase and investors will begin to use it more actively, transferring funds from other sectors. For oil, this is another reason for the price to fall - if the Fed continues the same course regarding the rate, then the barrel risks falling to $45. Which, in turn, will negatively affect the Russian currency, which in the medium term will fall in price to 67-70 rubles per dollar.

A week before the Fed meeting, almost all experts unanimously said that the agency’s board of directors would make just such a decision. Moreover, the head of the American regulator, Janet Yellen, had previously announced a similar decision, citing the positive dynamics of the main US macroeconomic indicators.

According to Alexey Mamontov, president of the Moscow International Monetary Association, the consequence of raising the Fed rate will be an increase in investments in American assets, which will hit the financial situation of most developing countries.

First of all, oil-producing states, whose economies are heavily dependent on income from the export of raw materials, will suffer. Market players are reorienting their investments from the mining sector in favor of dollars. Stock speculators will add fuel to the fire by concluding short-term contracts for the purchase and sale of hydrocarbons in the hope of winning back the last positions gained by oil. “Prices for “black gold” will inevitably slide down and in the near future will find themselves below the psychological mark of $50 per barrel,” Alexey Mamontov is sure.

This is not the last factor that can drop oil prices. According to Ruslan Grinberg, scientific director of the Institute of Economics of the Russian Academy of Sciences, we must not forget that Janet Yellen’s department is making its decision in conditions where the oil market is already in a very unfavorable situation. IN currently There are every prerequisites that the solidarity of the OPEC countries regarding the position on production reduction, hard-won at the end of last year, is beginning to collapse. The most powerful member of the cartel, Saudi Arabia, I’m no longer sure that I chose the right direction then. American companies skillfully took advantage of the decline in production of most oil market participants and revived their shale projects. Riyadh has already made it clear that at the May OPEC meeting, disagreements that have accumulated within the cartel may surface. This will serve as an additional incentive to break the memorandum signed by the countries.

Following oil, the value of the currencies of countries that are in one way or another tied to the extraction of mineral resources will also decline. Including Russia. The ruble, as most experts believe, is now excessively overvalued. Unlike oil, whose quotes have decreased by an average of 8-10% since the beginning of March, the value of the Russian currency has lost only 2% in value over the same period. “In the coming trading sessions that will follow the Fed’s decision, the dollar will add several percentage points and reach the level of 62 rubles,” believes Alexey Mamontov.

And this will only be a short-term effect. In the future, the position of the ruble may shake even more. According to FINAM Group analyst Bogdan Zvarich, the main attention of exchange players will be focused on the comments of the Federal Reserve that accompany the decision on the rate. “In them, investors will try to find hints about how soon the Fed will be ready to continue the rate hike cycle or will take a pause to assess the economic changes caused by the March tightening of monetary policy. In total, this year Janet Yellen’s department plans to make 3-4 similar decisions to raise rates. If investors decide that a further rate increase is inevitable in the near future, this could lead to an additional rise in the dollar and a new fall in oil prices. The ruble will then finally find itself between two fires, and the possibility of its strengthening will be in big question,” the expert believes.

According to Alexey Mamontov, the Fed’s continuation of its policy of increasing interest rate combined with a decrease in commodity prices, the dollar will reach 65-67 rubles by the end of this year. If the negative scenario is realized, it is possible that the American currency will come close to the 70 ruble mark. We can only hope that this will to some extent benefit the Russian economy as a whole, since revenues from hydrocarbon exports may increase in ruble terms. However, such a favorable outcome will depend on the demand for energy resources this year, the growth of which experts are not yet confident.

UPDATE: Further events, however, turned around contrary to many predictions - .

In addition to a direct increase in the federal funds rate, reducing the Fed's balance sheet is an additional tool aimed at tightening monetary conditions and increasing, albeit moderately, rates in the US money and debt markets, recalls Promsvyazbank analyst Ilya Frolov. In this case, the dollar and assets in it become more attractive to investors, he says: for example, you can borrow in euros at a rate close to zero, transfer the money into dollars and get more income due to the difference in the attraction rate and the placement rate. “Therefore, increasing the attractiveness of dollar assets can gradually lead to an increase in outflow from financial markets, characterized by less stability and higher risks,” concludes Frolov, including Russia as such markets. The Russian Central Bank is lowering rates, the analyst recalls, which will most likely cause a reverse flow of capital - from ruble assets to dollar assets, which may also negatively affect the ruble-dollar exchange rate. Frolov expects that by the end of the year the dollar will cost 59-60 rubles, i.e. it will rise in price to the Russian currency by 3.5-4%.

“Although the Fed’s plans to raise rates in December and do so three more times in 2018 raise our doubts, the mood regarding emerging market currencies, including the ruble, will become at least less optimistic,” the Sberbank CIB report said. . In the event of another rate hike this year, the dollar may strengthen in the near future, and the dynamics of emerging market currencies will become more cautious, believes Sberbank CIB analyst Tom Levinson (his words are cited in the investment bank’s review). Therefore, in the fourth quarter of 2017, the dollar will cost about 60 rubles, he believes.

“Further strengthening of the dollar will also restrain the growth of commodity markets, which until recently compensated the ruble for all geopolitical negativity and could knock the ruble out of the current equilibrium level to 59 rubles,” believes Alexander Losev, general director of Sputnik Capital Management. And if hydrocarbons and industrial metals also become cheaper, including due to today’s downgrade of China’s credit rating by S&P and the outflow of funds from there, by the end of 2017 the dollar will cost 60 rubles, he calculated.

“The results of this Fed meeting and the Fed’s future plans were predictable, so I think that the effect of a future rate increase and the start of a balance sheet reduction program has already been taken into account by the market,” said Oleg Kuzmin, chief economist at Renaissance Capital. According to him, the difference between the rate on ruble assets (including Russian sovereign bonds, which are extremely popular among foreigners) and dollar ones is still quite attractive for Russia. “Despite the fact that the Russian Central Bank will most likely continue to actively reduce key rate“We can hardly expect significant fluctuations in the ruble in the next year and a half,” says Kuzmin, who predicts that the dollar will cost about 59.5 rubles by the end of the year, but due to cheaper oil.

The market has been waiting for information on the timing of the Fed's balance sheet reduction since the summer. At the end of August, Fed Chairman Janet Yellen, speaking at a symposium in Jackson Hole, did not touch upon the topic of a possible change in the country's monetary policy and did not name the start date for the reduction of the Federal Reserve's balance sheet. After that speech, the dollar continued to fall - since the beginning of the year it has already fallen in price against the euro by more than 10%.

The US Federal Reserve's rate hike was expected: this is the second tightening of monetary policy in three months. As previously stated, the Fed will gradually wind down its policy of stimulating the economy through a policy of “zero” rates. But the weakening of the dollar on Forex does not fit with the theory - what went wrong?

"Wrong" reaction to Fed rate change

Changing the Fed rate affects the cost of money in the American economy. Since the US economy is “connected” to the whole world, this indicator also affects Russia – for example, through the price of oil. Some economists believe that if the exchange rate of a national currency is affected by a change base rate another country, this means the dependence of Russia’s financial and monetary policy on external institutions.

When the US Federal Reserve increases rates, the market Forex reacts unambiguously: it becomes more expensive to borrow, and it is more profitable to invest in bonds. As a result, the dollar exchange rate rises and the ruble weakens: it becomes easier for the Ministry of Finance to execute the budget, but the average consumer loses - due to the fact that most goods are imported from abroad, their cost increases.

The current Fed rate increase does not fit into economic logic: against the backdrop of rising rates, the dollar only weakens, causing the Russian currency to strengthen and the cost of oil to rise.

Why did the Forex market react with a weak dollar to the Fed rate hike?

It is difficult to name the exact reasons. It is possible that the Fed rate increase was too predictable and the consequences of the increase were taken into account in advance in the main quotes. The question of the rate was of little interest to anyone: within a few weeks, most economists understood that the Fed rate would be increased. I was interested in another question - a hint about how many times the rate will change. Nothing special happened: as promised, there will be three rate hikes in 2017, which means monetary policy will remain predictable.

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The dollar's outlook is influenced by Donald Trump's readiness to depreciate the national currency in order to support producers and the reduction in the volume of oil purchased by the United States. Considering that the new US budget concept increases spending on defense and internal security, and no major infrastructure projects (except for the construction of a wall on the border with Mexico) are identified, this is fraught with increased inflation. The international market will react to this by reducing interest in the dollar.

There is serious capital flight in the US government bond market: it is believed that this is primarily due to the slowing economy of China, which needs to “close” its budget. But many tend to see other reasons for this: the uncertainty of relations between the United States and China. However, it is not only China that is getting rid of US securities: Russia, Saudi Arabia and even Japan have also joined the process of selling US government bonds.

On December 16, 2015, the US Federal Reserve raised its key rate by 0.25%. This caused considerable resonance in the global economic community - after all, last time the rate was changed in mid-2006. What is the need for such changes, and what can they lead to?

What is the base interest (key) rate?

This indicator represents the percentage at which banking organizations borrow funds from Central Bank countries (in America its functions are performed by the Federal Reserve System). The interest rate at which banks issue loans to ordinary citizens cannot be lower than the established key rate - otherwise credit institutions will begin to operate at a loss. The 2008 financial crisis, which began in America and gradually spread throughout the world, forced the American authorities to take an unprecedented step and reduce the key rate to a record low level, ranging from 0 to 0.25%.

The temporary measure aimed at stimulating the economy and getting out of the current difficult financial situation dragged on, and the base interest rate was changed upward only in mid-December 2015.

How will a change in the Fed key rate affect the dollar exchange rate?

According to analysts, changes in interest rates will have a significant impact on the dollar exchange rate against the ruble (). Thus, the rating agency Moody’s prepared a report indicating the significant vulnerability of the Russian economy to changes in the domestic financial policy of the United States. The same opinion is shared by I. Didenko, who is a member of the International Union of Economists. According to him, raising the key rate will lead to a strengthening of the dollar and, as a result, a depreciation of the ruble.

Russian analysts, who are government officials, are much more optimistic. Deputy Chairman of the Central Bank of the Russian Federation S. Shvetsov announced the likely strengthening of the ruble and a depreciation of the dollar.

E. Nabiullina, who holds the post of head of the Central Bank, noted that the ratio of the ruble and the dollar is influenced by a combination of many factors, including oil prices, the foreign policy situation in the world, the economic interaction of Russia with partner countries, so a change in the key rate will not have a significant impact influence on the value of the dollar.

The head of the Ministry of Economic Development A. Ulyukaev said that the decision made by the Fed did not come as a surprise to anyone, and the expected increase in the key rate was taken into account when concluding contracts for oil supplies.

A change in the US Federal Reserve key rate by 0.25 points increased the value of the American currency on the world market. However, the rather insignificant size of this indicator allows us to conclude that there will be no radical jumps in the exchange rate - for example, since the decision was made to increase the rate, the dollar exchange rate relative to the ruble has increased by no more than a ruble. Oil prices have a much greater impact on the ruble exchange rate ().

After almost two years of waiting, the US Federal Reserve finally decided to raise its rate. This happened for the first time in the last nine years. It is no coincidence that the whole world watched the actions of the American regulator so closely - the actions of the Fed will have an impact on the entire global economy. This will also have extremely serious consequences for Russia.

Late Wednesday night, the Fed announced it was raising its benchmark rate from a record low of 0-0.25% to 0.375% per annum. Expectations of this decision have long strengthened the American currency.

“The Fed’s steps will not have a direct impact on Russia. However, the indirect impact through the strengthening of the dollar and falling oil prices may be quite sufficient.”

The last time the US Federal Reserve raised rates was June 29, 2006. Throughout 2007–2008, the Federal Reserve gradually lowered the rate until it reached its minimum level in December 2008. Since then, the rate has remained at 0.25%.

To cope with the financial crisis that had set in at that time, Washington began printing money, launching three so-called quantitative easing programs in a row. Part of the money ended up in the stock market, which began to grow much faster than the American economy itself, and the world economy as a whole. This allows us to talk about inflating a financial bubble in the United States. However, Washington stopped the printing press in time, in October 2014, and announced plans to raise the rate.

This is what largely allowed the dollar to strengthen so much over the past year. Last year and influence the fall in oil prices. Raising interest rates should gently deflate the stock market bubble, preventing it from collapsing abruptly.

The Fed rate has remained at zero for six years, which means a failed policy, in an interview with the VZGLYAD newspaper, an authoritative Chinese expert on global financial system Song Hongbin (he managed to predict the American mortgage crisis of 2007 and the subsequent global financial crisis). “If the US Federal Reserve wants other players to be confident in the American economy and the dollar after the quantitative easing policy, as in previous times, then it will have to raise the key rate,” he explained the hopelessness of the American regulator’s actions.

At the same time, the Fed has to act in opposition to the position of other players, notes FxPro financial analyst Alexander Kuptsikevich. Central banks of other major economies, on the contrary, are reducing their rates. Thus, the ECB literally lowered the rate on December 4 and extended the duration of the European quantitative easing program. The Reserve Bank of New Zealand cut its key rate a week ago, and the Australian regulator announced its readiness to reduce the rate. In the second half of the year, China repeatedly softened financial policy and intends to continue this path. The head of the Bank of England, who six months ago promised that the issue of tightening policy would be relevant in the winter, said the day before that raising rates is now irrelevant. The Russian Central Bank has also reduced the rate more than once this year and is ready to lower it at its upcoming meetings.

Implications for the global economy

An increase in the US Federal Reserve rate could lead to increased economic instability both in the United States and in the world. For the United States, this step could mean problems with the labor market, a slowdown in inflation, and a freeze in wage growth. The International Monetary Fund warned about this, among other things. In addition, a rate increase could cause a further strengthening of the dollar and, in turn, a significant drop in exports.

“Raising US lending rates would jeopardize the renewal of $17 trillion in private loans, of which 82% are mortgages and $1.3 trillion are student loans. American consumers will no longer be able to earn money. Their assets to their income are already at the highs of the mortgage crisis of the 2000s. To convince the bank that they will return the money, American consumers will begin to save on non-essential goods, including consumer electronics and new clothes,” expects Mikhail Krylov from Golden Hills-Capital Investment Company.

However, China may suffer even more. The Fed's rate hike promises a decline in US demand for imported goods. And the worst situation will be in China; China makes money mainly from selling its goods in the United States.

The strengthening of the dollar is already leading to the withdrawal of capital from emerging markets, including China, which results in the need to devalue the local currency. American dollars issued as part of quantitative easing programs ensured an increase in American incomes and stimulated domestic consumption. Americans' expenses exceed real incomes by $2.5–3 trillion a year, notes Mikhail Khazin, president of the Neocon group. Real average wage in the country is at the level of 1958, and everything above was provided by money issue, the expert explains.

China, in turn, lives on issuing dollars. He needs to invest about 2.5–3 trillion dollars annually in the domestic market, Khazin notes. Therefore, tightening monetary policy could hit both the US and the Chinese economy.

By the way, Russia may even try to make money from this whole story. “The seemingly bottomless US market will now begin to shrink. We see this as a favorable opportunity to position the Eurasian market as an alternative to the American one. To do this, you just need to get the sanctions lifted,” says Krylov.

Consequences for Russia

The Fed's steps will not have a direct impact on Russia. However, the indirect impact through the strengthening of the dollar and falling oil prices may be enough for a new decline in the Russian economy.

Since the Fed began hinting at raising rates at the end of 2013, the ruble has been under constant pressure. “Only part of the fall of the ruble is explained by geopolitics, the rest is the rise of the dollar and capital outflow from emerging markets,” notes Alexander Kuptsikevich.

“Oil is likely to return to its 1998 lows. At current prices, this is about $18 per barrel. In this case, the dollar will jump up to a hundred against the ruble. Confidence in the dollar will be restored, but at what cost? It is quite possible that this will be a Pyrrhic victory,” says Mikhail Krylov.

Other experts do not expect an initial major market reaction to the Fed rate hike. A minimal increase and soft rhetoric may even support risky currencies such as the ruble, Ivan Kopeikin from BCS Express does not exclude. And here subsequent statements and forecasts can have a much more serious impact on stock assets.

“It is unlikely that the Fed’s decision to raise rates will be an incentive for a strong weakening of the ruble. Perhaps, with the current high level Given the volatility of the Russian currency, such expected news will not cause a reaction that stands out radically from the background of the usual market “noise,” believes Vitaly Manzhos, senior analyst at Obrazovanie Bank.

However, the strengthening of the dollar at current heights, even without sharp jumps in Russia, also does not bode well. In September–October, the Russian economy showed the first signs of slowing down, which gave a chance for a small but GDP growth in 2016. However, the strengthening of the dollar and the decline in oil prices below $40 may not allow success to be consolidated. In this case, we should expect a fall in stock indices and even an increase in the key rate.

“For the budget at the first stage there may not be strong consequences, since the fall in oil prices will be compensated by the same weakening of the ruble. But this threatens to deteriorate business business activity, which in the future, of course, will affect budget revenues,” says Alexander Kuptsikevich. According to export estimates, each ruble in dollar terms costs the Russian budget about 90 billion rubles per year.

A strong dollar also threatens to increase costs and reduce profits for Russian enterprises that depend on imported components. Inflation will not slow down, as the Central Bank of the Russian Federation now hopes, but will accelerate.

However, there is also a third scenario. It cannot be ruled out that raising the Fed rate, if not immediately, then gradually will lead to a weakening of the dollar. At least, this is what historical parallels suggest. “Over the past 25 years, the Fed has started a tightening cycle twice. Therefore, if we look at the analogy with 1994 and 2004, when the Federal Reserve carried out the first rate increase, there was a decrease in the dollar index. It is likely that this will happen this time too,” says Irina Rogova from Forex Club Group of Companies.

“Looking ahead to the six months following the Fed rate hike, the dollar could remain under pressure. The ruble, naturally, against this background may receive moderate support. Moreover, oil may also show some growth, since this energy carrier is denominated in dollars,” says the expert.

“We would venture to assume that following the meeting, the dollar will decline slightly, returning the euro/dollar pair above 1.10. This gives the ruble a chance to go below 70 per dollar,” says Alexander Kuptsikevich.

For Russia, in this case, it is important how much the dollar falls. A strong subsidence of the American currency is also unprofitable for us. In the event of a significant strengthening of the ruble, Russian goods exported may become less competitive. However, oil revenues will increase in this case. Although there is back side medals – low prices oil prices are stimulated by structural changes in the commodity economy.

The best option for the Russian economy would be stability in the foreign exchange market. However, until the Fed clearly decides on its future policy, this is unlikely.