Baku, Azerbaijan, Dec. 11
By Anvar Mammadov – Trend:
The decision of the US Federal Reserve System (Fed) will not affect the exchange rate of the Azerbaijani manat against the dollar, John Hardy, head of foreign exchange strategy at Saxo Bank, said.
"It doesn’t appear to me that market forces are affecting the manat’s exchange rate at this time, as it appears a new semi-fixed exchange rate is in place that will be possible to maintain as long as oil prices remain relatively elevated," he told Trend Dec. 11.
"The market (including us) is almost 100 percent certain in expecting the Fed to hike rates 25 basis points to bring the Fed Funds rate to 1.25-1.50 percent," Hardy said. "The nomination of Jerome Powell will not affect this decision, as he does not become Fed Chairman until next February."
"We see little for the market to get surprised about the Fed decision at this week’s meeting," he said. "After all, a hike is entirely expected and the Fed’s leadership will change next February (much of the Fed leadership will be changed from here, due to several on the Fed’s Board of Governor’s retiring), so anything said by Janet Yellen at her last regularly scheduled press conference as Fed Chair will be seen as her establishing her legacy, rather than as anything that has immediate bearing on what the Fed will do in 2018. As of next February and thereafter, it will be largely a whole new Fed."
"The likely new Fed Chairman Powell has never dissented from Fed decisions, so he is largely seen as providing continuity, and that is likely as long as nothing surprising is unfolding in the economy, i.e., he is seen as in favour of partial deregulation of some of the strict rules that developed after the financial crisis of 2008-09 and he has a background in the private sector as an investment banker – this is very different from Yellen’s and her predecessor Bernanke’s academic backgrounds," he said. "The moment where Powell is likely to prove different from his predecessors will be when the US either enters a recession or if inflation and growth pick up more than expected. How he would behave in a new crisis as leader is effectively an unknown."
The results of the meeting of the Federal Open Market Committee will be disclosed Dec. 13. Most of foreign experts think that the regulator will increase the range of the basic interest rate up to 1.25-1.5 percent.
The Federal Open Market Committee raised the rate up to 0.25-0.5 percent per annum from the record low level of 0-0.25 percent in December 2015 following the meeting for the first time since June 29, 2006.
In 2007-2008, the regulator gradually lowered the rate until it reached the minimum level of 0-0.25 percent in December 2008.
Following the March meeting, the regulator again raised the rate up to 0.75-1 percent per annum, and up to the current level in June.
During the meetings in July, September, October and November, the rate remained unchanged at the level of 1-1.25 percent.
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