The continuing pandemic, the overall global growth of inflation and the tense geopolitical situation have a strong pressure on the world economy. The largest economy of the world was injured - the US economy.

In recent months, the labor market in the United States began to recover. In 2020, in the midst of a pandemic, the unemployment rate reached almost 15%. However, then there was a trend for a decline, and in February 2022, unemployment was already 3.8%.

This suggests that while the labor market feels perfectly. But as for inflation, this indicator has reached record values ​​over the past 40 years.

Inflation in the United States amounted to 7.9% in annual terms (at the target level of Fed in 2%). At the same time, the US economy looks clearly overheated due to the infusion of a large mass of funds.

To support the Fed Pandemic, most likely would quickly raise a key rate if it were not for an alarming geopolitical situation around the world and its unpredictable consequences that can create additional inflationary pressure on economic activity in the United States.

Recently, in 2019-2020, inflation was kept at relatively low levels. For example, in April 2020, inflation rushed almost to 0 in annual expression due to a sharp drop in demand in the midst of a pandemic.

But then inflation began to gain momentum sharply, since, the economy was provided with unprecedented assistance, and demand recovered.

At the moment, the Fed is concentrated on how to overcome such a high inflation rate in the country.

The increase in gas and energy prices was significantly influenced. Prices for gasoline in the States rose under dozens percent. Also, there was a significant risk of improving the cost of products, even though the proportion of US food consumed, which imports from abroad, small.

Therefore, the Fed decided to raise a key bet for the first time since 2018. The key rate is a measure of money in the economy. The rates are higher, the higher interest rates on loans and deposits.

Using the Key Rate, the Fed and other regulators control the amount of money supply in the economy. If the rate is low, then the amount of money increases sharply, as the number of loans is growing.

At the last meeting of the Fed raised the target range of rates on federal funds on 25 b. P. The federal fund rate is the interest rate in which banks provide on credit to other banks on credit.

The main reason for increasing the key bet - record inflation indicators. It is likely to continue to raise the key bet to cope with inflation. But this will do it carefully and predict to avoid the collaps in financial markets.

Most likely, at each meeting of the Fed will increase the key bid on 25 b. p. and comes to 2.5%.

How did the market behave during the raising rates in the crisis and during the crisis of the Dotcomms in the 90s?

The bet began to raise from June 30, 1999 (C 0.25% to 6.5%). Total bet raised 6 times in a year. 3 months before raising the rate, the market managed to grow by 5%.

The market began to decline exactly after the announcement of raising rates. After the first increase in the rate, the S & P 500 index fell by 3% per month. But the 2nd increase was almost recovered until the previous levels.

After the 2nd increase, the index for a month already fell by 6% (the peak of the fall on the horizon of the entire cycle of rates). The total index fell by 10% in 4 months during the first 2nd rates.

Then the growth and significant consequences were not observed on the horizon.

Now consider the ravine raising cycle in 2006. Then the Fed first decided to tighten the policy to contain the bubble in the housing market. During 2006, the rate was raised 4 times (from 4.25% to 5.25%).

The dynamics of the index 3 months before the raising rate was positive and not as volatile, as in the same period of the crisis of dotcomms. The S & P 500 index smoothly grew by 6%.

The reaction of the market for the growth rate during the bubble of the housing market was already completely different than when the market reactions during the growth of the rates of the Dotcomms.

At the first 2 raises, the market was in the sidework in a period of 4 months. The fall of the market saw only during the 3rd and 4th rise of the bet (and then fell only by 5%). And after 2 months recovered until levels of the year.

Further, the Fed begins to implement the folding of the QE program and starts Qt.

The question of folding QE and the beginning of the Qt process went on the last meeting of the Fed. And the QT procedure itself is unlikely to postpone, and it will begin already in May.

Also, the Fed revised some indicators for the US macroeconomics. GDP growth in 2022 is planned at 2.8%, unemployment will remain within 3.5%.

At the end of 2022, inflation will reach 4.3%, and at the end of 2023 will be within 2.6%. The key rate at the end of 2022 will be 1.9%. The key rate was finally 2023 - 2.8%.

The Fed remains many more options for maneuver. All conversations about the sunset of the American economy or about the end of the dollar era currently look like a fiction.

Despite all geopolitical difficulties, the United States remains the world's largest economy. And this economy is still able to cope with all the problems.

Today, thanks for your attention!

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