A wait-and-see state awaits the world over an upcoming US Federal Reserve decision to raise interest rates at its meeting on Wednesday, which adds to turmoil and tensions in global markets.
“Al-Web” interviewed economists about their expectations of how the US Federal Reserve’s decision will affect dollar movements.
Dr Hani Aboul Fotouh, an economist, said the Federal Reserve should agree to raise interest rates for the fourth consecutive time by 75 basis points as part of a fierce battle to reduce severe inflation plaguing the US economy.
He added that this increase would raise the interest rate on loans to a new target range between 3.75% and 4%, to be the highest rate on federal funds since January 2008, noting that the decision would also represent the biggest move. strict in Fed policy since the 1980s. , with a high probability that this will cause an increase in the recession rate.
The economist pointed out that today’s Fed decision will affect the dollar exchange rate, after the US dollar index rose more than 15% this year after the Federal Reserve drastically hiked interest rates. which ultimately led to the crushing of other currencies and increasing pressures on the world economy, following the broad appreciation of the US dollar against all major world currencies as well as emerging market currencies such as the Egyptian pound.
He believes that many central banks have responded by intervening during the current period in the foreign exchange market to address downward pressures on their currencies and have taken steps to limit the impact of the currency depreciation on inflation and prices.
Dr. Hani Aboul Fotouh confirmed that the recent decision by the Central Bank of Egypt to raise major interest rates by 200 basis points to liberalize the exchange rate will weaken any tangible impact of the US Federal Reserve’s decision this time on the rate. exchange rate of sterling against the dollar because the central bank allowed the flexibility of the exchange, which was freely determined by the forces of supply and demand, and is now not afraid of the growing phenomenon of dollarization.
Today’s Fed decision
Dr Ahmed Moati, an economist, expected the Fed to raise interest rates by 75 basis points, due to the 2.6% increase in gross domestic product in the United States, while individuals’ spending rates have increased. 6.6%.
He indicated that the Fed will then withdraw liquidity from the markets to reduce its spending and thereby control rising rates of growth and inflation.
He believes there are two scenarios determined by the decision of Jerome Powell, chairman of the US Federal Reserve, after his meeting today to reveal the course of his monetary policy during the next meeting in December.
• Reduce the rate of interest rate hike in order not to affect the recession, which will lead to the dollar falling against the Arab currencies.
• Continue to tighten its monetary policy, which will stimulate the dollar to rise against the basket of currencies
He concluded his expectations that the US Federal Reserve’s decision will not significantly affect Egyptian local markets, and will be more likely in the event of a 50-point hike in interest rates, which will direct liquidity back into emerging markets again.
