Date: 3 days ago   Category: Economy

As the rate of U.S. Fed influences economy of Ukraine


Recently the wide resonance was received by "verbal interventions" of the U.S. President Donald Trump to the Federal Reserve System.

"My problem is FRS. FRS dispersed, raises rates and it is senseless", - the American president said recently.

this year the Federal Reserve System raised a key interest rate three times, without hiding that it does it for the purpose of prevention of overheating of the economy. But Trump interprets it so that the Federal Reserve System contains GDP growth. "Every time when we do something big, it raises the stakes", - Trump said, having added that to the head of the Federal Reserve Jerome Powell, "probably, just it is pleasant to raise the stakes". I will remind, in the second quarter gain of GDP of the USA in annual measurement was 4.2% (at most since 2014), in the third quarter - 3.5%.

as a result, on November 28 Powell said that the present level of rates (they are in range of 2-2.25%) is close to neutral. "Neutral" level is that which at the same time does not constrain, but also excessively does not disperse economy.

But FRS not only raises rates, leading to growth of dollar exchange rate owing to increase in appeal of the tools nominated in it, but also reduces the balance. Since October, 2017 until the end of September of this year the balance of FRS was reduced by 270 bln. dollars. Increase in a rate and reduction of balance of the Federal Reserve System has a task monetary policy "normalization", that is creation of a situation at which the financial markets and economy of the USA can independently move, without artificial support from FRS in the form of the QE programs. Gradually leaving the market, FRS levels also reasons for charges of what it "inflates" a bubble in the market of assets.

Time for toughening of monetary policy in the USA is chosen successfully. Strong dynamics of GDP, growth of volumes of industrial production, increase in internal sales increased ability of the American companies to generate a cash flow independently, without "injection of liquidity" from FRS. In fact the Federal Reserve System is forced to raise rates in response to fiscal incentives within tax reform which pushed the budget deficit of the USA to the level of 5% of GDP. There is it at peak of a business cycle when similar fiscal incentives can do much harm - the economy of the USA is close to "overheating", it approaches restriction of production capacities, unemployment is on a semicentennial minimum (3.9%).

Passes to strengthening of policy and the ECB - an exit from the program of quantitative easing started in January, 2015 is planned for the end of this year. How all this to affect developing countries which also Ukraine treats?

the First problem. By estimates of Bank for International Settlements, the country with emerging markets for the last 10 years twice increased the debt nominated in dollars, having brought it to the sum of 7.2 trillion dollars. Therefore developing countries receive double blow - from the becoming stronger dollar and from the best rates. Our country in a difficult situation - for example, next year Ukraine has to pay about 5.9 billion.

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