The decline of the Federal Reserve rate for the first time in 10 years: what will it give to Russia and the ruble?

Most financial market players have no doubt that at the meeting of the US Federal Reserve July 30 to 31 the rate for the first time in 10 years will be lowered. And this is not surprising in the context of "trade wars", the threat of slowing world GDP growth, the dangers of lack of dollar credits in developing countries and Donald's willingness to do so. Trump to weaken the dollar.

The probability of a rate change is well reflected by the currency futures contracts on it. They show a 100% conviction in a July rate cut of 0.25 percentage point.

And the probability of an additional reduction of 0.25 percentage points, up to 2%, is 65% for the next meeting in September.

The Fed's low rate can be seen as a medicine for the economy – by badogy, for example, with a drug designed to regulate the pressure on humans. If the pressure is low, then to increase it, the doctor prescribes a mixture. So in the treatment of the economy fed by a doctor reduced the rate of its loans, so that cheaper loans stimulate investment in production, the increase in employment and wages, healthy demand, normal inflation of 2%, etc.

This occurred during the crisis of 2007-2008, when the Fed began to lower the rate of 5.25%, bringing it to 0.25% in 2008.

But after all, when a patient recovers, the medication is canceled, otherwise the pressure will be increased. And it is also a disease, no less dangerous. The treatment must not harm a living organism – whether it is a person or an economy.

For her, keeping rates low at the end of the crisis means the possibility of "hypertension", overheating, excessive inflation, inflation "bubbles" in the capital, real estate and other dangerous diseases, which cause many collapses.

As a result, in 2016, the Fed began to gradually increase the percentage from 0.25% to 2.5% currently. In addition, the last increase of 2.25% took place in December 2018 and was accompanied by rhetoric about a further rate increase twice in 2019.

The reduction in the Fed's rate as a whole is positive for the global economy. It reduces the cost of borrowing not only in the United States, but also in foreign markets, given the dominant role of the dollar in the financial world.

This boosts demand for investments, risky badets and commodities. In this regard, it is beneficial for Russia because it increases the demand for energy vectors, the prices of our export products, increases the flow of funds to the country. After all, if loans around the world become cheaper, it is more profitable to invest in production, the production of goods increases, which requires more raw materials and energy. All other things being equal, it bears the cost of hydrocarbons.

For the ruble exchange rate, lowering the Fed rate means substantial support. Cut the interests of the Fed makes the purchase of badets in dollars less attractive and less profitable, reduces the green rate, including against the ruble.

The announcement of the Fed's rate cut was one of the main reasons for the weakening of the dollar against the ruble, which had surpbaded 70 rubles against 62 to 63 rubles. But in many ways, the effect has already been picked up by the market in advance, and if the rate actually decreases, the reaction will not be strong. But if the Fed rethinks its plans to reduce the rate after July, the ruble will feel the pressure drop.

At the same time, the Bank of Russia also intends to reduce its policy rate – for our country, this drug is extremely important now. But this is a factor of weakening the ruble and a low growth rate of the country's economic indicators. Therefore, in combination with these multi-directional factors, it is unlikely that the Russian currency will continue to strengthen significantly in the coming months.

The most relevant range of fluctuations in the exchange rate of the ruble – 61.5 to $ 66 for the dollar in the future until the end of the year.