Forecast on the activity of the American regulator

Today, January 26, the US Federal Reserve will present the results of its two-day meeting. According to most analysts, the regulator will leave the key rate at the current level of 0-0.25%, but its other intentions are unclear.

Earlier, the head of the Fed, Jerome Powell, said that the main task of the US Federal Reserve at the moment is to fight inflation and curtail quantitative easing and asset buyback programs. A series of rate hikes will follow.

Against the backdrop of waiting for the decisions of the Fed, the volatility of the stock markets is growing, investors have taken a wait-and-see attitude. Yesterday, the NASDAQ fell 2.28%, the Dow Jones fell 0.2%, and the S&P 500, which has lost 11% since the beginning of the year, fell 1.2%.

Meanwhile, the dollar index against world currencies rose to a maximum since January 2022, to 96.26 points (+0.4%). The ruble fell slightly against the dual-currency basket.

Although the Russian currency is now more pressured by geopolitics and inflation, the tightening of the policy of the US Federal Reserve may also become a negative factor of influence.

“We expect the US Fed to be softer in rhetoric than the market has been suggesting so far. It is almost certain that the regulator will not raise the rate today, although many have already said that a series of hikes could begin before the quantitative easing program is finally curtailed.

However, we believe that this will not happen: a difficult situation has developed on the market, US indices of small companies have already fallen by 20-30%, and the main US indices – S&P 500, Dow Jones, NASDAQ – by 15%. This is a fairly serious fall, and the Fed will be forced to be more cautious. Nevertheless, inevitably 3-4 rate hikes will occur during the year, as well as curtailing programs. Therefore, the result of today’s meeting is most likely to be neutral and rather supportive of the market, and the Fed will look more gently and delve into this story without acting too aggressively.

For the world economy, raising rates is in any case a complication of processes and a rise in the cost of money. The World Bank has already lowered expectations for economic growth this year for almost all countries, including Russia, the USA, China and the European Union for 2022, while raising expectations for the next one by 0.1-0.2%. More expensive money will slow down the global economy and its development, as well as strengthen the dollar. Accordingly, this is a negative signal for the ruble, but all these factors are already embedded in our currency, and geopolitics directly carries greater risks than economics. We expect that the current pressure on the Russian currency will decrease and we expect it to slightly strengthen in the medium term to the nearest levels of 76 rubles per dollar,” Andrey Syrchin, CEO of CRESCO Capital Ltd., commented on the situation.