FED further strengthens USD
By Sara Israfilbayova
The U.S. Federal Reserve, acting as America’s central bank, took another step towards normalising monetary policy, by increasing interest rates to a 1% to 1.25% range.
The US Federal Reserve has pressed on with the normalization of interest rate policy, by hiking borrowing costs for the second time this year.
The Federal Reserve raised the rate previously in March 2017 to 0.75-1 percent per annum and then kept it at the same level in May.
Bloomberg poll revealed that only 5 of 100 economists surveyed expected the FED to maintain the interest rate in the prior range of 0.75-1 percent. The rest of the surveyed experts predicted a rate hike by 25 basis points to 1-1.25 percent.
Earlier, President Donald Trump warned that the dollar "is getting too strong," repeating his opinion that the currency's gain makes American products less competitive globally.
"I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me," Trump told The Wall Street Journal.
Trump stressed that the strong dollar would "hurt ultimately, further adding that a strong dollar is very difficult to compete with other countries.
The FED rate is one of the most effective and at the same time dangerous levers for raising the American economy. Each increase adversely affects developing countries that are in dollar dependence on the U.S. The gap between the poor and rich inhabitants of the planet becomes deeper.
Economist-expert Parviz Heydarov said that the U.S. economy is now completely out of a difficult situation. The government has achieved all its goals - unemployment is below 5 percent, inflation is about 2 percent, economic growth is about 1-2 percent.
The economist is sure that this move could lead to a strengthening of the dollar. He also talked about the possible consequences for the economy of Azerbaijan.
“The rise of dollar leads to a drop in oil prices. The fall in energy resources, leads to a drop in the economy of those countries, incomes of which depend on energy revenues. Of course, this will negatively affect Azerbaijan,” he told Milli.az.
Previously, Head of the Central Bank of Azerbaijan (CBA) Elman Rustamov said that increase in the key interest rate of the U.S. Federal Reserve System will not have a strong impact on the financial market of Azerbaijan and the manat rate.
The decision of the FED is not a fundamental factor affecting the manat rate against to the US dollar, according to him.
Official exchange rate of Azerbaijan’s national currency, the manat, against the US dollar was set at 1.7023 AZN/USD since June 14.
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