Historic decision of the Federal Reserve to raise US interest rates for the first time in almost a decade, was taken in the background of concerns about inflation, reveal the minutes of the December meeting of regulators.
According to the document "a number of members of the Open Market Committee expressed concerns about the risks that threaten the inflation perspectives." The institution stressed that they will continue to carefully monitor consumer prices.
Markets were convinced that the Fed will start tightening monetary policy in December, but the published evening protocols on Wednesday indicate that the decision was "on the edge." Now strategists try to anticipate how will continue the raise of interest rates in 2016 and very few expect another step in January, but the majority relies on a new increase in March. Whether this will happen depends on the incoming data. Generally, the central bank believes that weak inflationary pressures are due to temporary factors such as low oil prices, but at least for now the hopes for a convincing increase in consumer prices does not take place.
According to the Federal Reserve, the US economy will continue to expand at a steady, though not steep pace in 2016. Regulators expect domestic consumption to compensate the weakness of the global economy, which hinders exporting companies to sell their products abroad.
The central bank expect the labor market to continue to improve and the increase in employment and wages put upward pressure on inflation.
"Almost all participants in the meeting considered that there are compelling reasons to expect growth of inflation to the target level of 2% over the medium term".
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On Tuesday, the International Monetary Fund cut its global growth forecasts for 2016 by 20 basis points to 3.4%, marking the third decrease in the last year. The message was announced hours after the National Bureau of Statistics of China said that the country's economy grew by 6.8 percent in the fourth quarter, growing slower than the previous quarter. The annual GDP for 2015 increased by 6.9%, significantly lower compared with growth of 7.3% a year earlier.
By Morgan Stanley added, that after the increase in rates in the US in December, Fed is in a vulnerable position: at the moment the price is fully accounted for only one further raising of the interest rates this year, although recently were mentioned three or four.
During the first day of the new week the trading on the currency markets remained relatively peaceful amid normal levels of liquidity.
The restrained growth in the dollar after the first raise of the rates in the US for nearly a decade allows us to count on continued development of the upward trend, said the analyst Enrique Alvarez Diaz from Ebury Partners, who predicted the dynamics of the US currency in 2015.
Forex strategists of BNP Paribas said, that they expect a favorable moment for opening new long positions on the US dollar.
Historic decision of the Federal Reserve to raise US interest rates for the first time in almost a decade, was taken in the background of concerns about inflation, reveal the minutes of the December meeting of regulators.
According to the Federal Reserve, the US economy will continue to expand at a steady, though not steep pace in 2016. Regulators expect domestic consumption to compensate the weakness of the global economy, which hinders exporting companies to sell their products abroad.
Happy New Year 2016!