Kuwait- Fed set most illiquid month to raise interest rate- NBK report
Date
12/20/2015 9:08:10 AM
(MENAFN- Kuwait News Agency (KUNA)) KUWAIT Dec 20 (KUNA) -- The US Fed missed all other interest rates hike opportunities during the year and chose December the most illiquid month of the year to start the lift off according to a report on Sunday.In a historical meeting the Fed ended the era of zero interest rates by tightening monetary policy by 25 bps increasing the Fed funds target range to 0.25 percent to 0.50 percent and the discount rate to 1.0 percent with a unanimous vote NBK said in its latest reports on monetary markets.Although the event didn't generate large volatility for the major five currencies it happened to be a major episode for emerging market and commodity currencies as we continue to witness lately.For now commodities and emerging markets continue to hemorrhage as their future will be determined by how the disagreement between the market and the Fed about the pace and extent of hikes gets resolved.The Fed's median forecasts for real GDP growth unemployment and inflation were unchanged relative to the previous meetings. 2016 GDP growth was revised up to 2.4 percent while the 2017 and 2018 forecasts were left unchanged at 2.2 percent and 2.0 percent. The unemployment rate is expected to decline to 4.7% in the next three years down from the previous 4.8 percent forecast the NBK stated.Meanwhile the Eurozone economic data surprise index remained resilient throughout Q4 and outperformed the US counterpart. The continuous low currency gave a boost for all of Europe especially Germany it noted.After dropping in the first two months of the fourth quarter the Euro stabilized in December after the ECB meeting disappointment. As the market expected a further drop in interest rate and an increase in the size and composition of the monthly purchases the ECB didn't see the necessity to act and deliver on all expectations. In addition having become the funding currency of choice in 2015 the continued deterioration in emerging and commodities markets helped the Euro remain stable in December. As we come close to the holiday's season traders' reaction to the Fed December meeting is to reduce risk exposure take positions off and remain on the sideline into year-end.In the UK the Sterling is ending the year on the back foot as the currency is at risk of slipping to its lowest level since April.The Pound hardly received any relief from the release of relatively strong UK retail sales data on Thursday the report said.UK consumers have been the pillar of the strong UK recovery. But for the pound to reverse recent weakness the data would need to be accompanied by more visible inflation pressures through 2016 for the moment nonexistent. (end) mfs.tab.msa
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