The U.S. Federal reserve left the base rate unchanged

The building of the Federal reserve in Washington

At the end of the two-day meeting, the operations Committee on the open market (FOMC) U.S. Federal reserve left its benchmark rate unchanged: 0,25—0,5%. The last time the fed raised the key rate six months ago, according to the results of the FOMC meeting on 15-16 December, the Committee ordered to be raised on 25 b.p. Prior to this the fed rate has not been raised since 2006.

Then the fed explained its step by signs of a strengthening us economy, the recovery of the markets (in particular labor) after a prolonged recession. Then, in December, fed chair Janet Yellen hinted at the likelihood of further rate increases in 2016.

In the last six months economists were trying to predict not only the value of raising the base rate as the total number of such decisions in the foreseeable future. For example, at the March meeting, the fed officials were assured that a favorable macroeconomic situation in the States, they are likely to spend in 2016 two more hikes by 25bps.p. every time. From the beginning it’s been four FOMC meeting, four more remained.

On the basis of the published transcripts of the FOMC meetings and of statements of the fed, the decisive criterion for the rate increase is the state of the economy and the labor market — the growing number of jobs, increase inflation to a target of 2%, improving the business climate.

However, on 3 June the Ministry of labour of the USA has declared that in may 2016, employers created only 38 thousand jobs — the lowest since September 2010. The average for the previous three months was 116 thousand new jobs, and for the previous year — 219 thousand in April, inflation was at an annual rate of 1.1%, which is better than March’s 0.9%, but still far from the target.

In the end, last week, Yellen herself said that the increase in the key rate is delayed until, until you have solved all the “new uncertainty in the economy. Published two days later, a survey of economists by The Wall Street Journal showed that a fed rate hike in June believed only 6% of analysts versus 31% a month ago. Now 52% of the experts believe that the base rate will be raised at the next FOMC meeting on July 27.

In turn, at the end of may the Minister of economic development of Russia Alexei Ulyukayev made the assumption that the fed will indeed raise rates “on one of the following two meetings — in the middle of June or end of July. The regulator’s decision on the ruble against the U.S. dollar, he said, affected slightly. On the other hand, an economist at the Bank BNP Paribas Michael Dybula told RBC on the eve that the rate hike by the fed (along with the decline in oil prices) will play against the ruble.