It Is Impossible to Avoid Impact of FRS Decision on AZN

The discount rate increasing by the US Federal Reserve is undesirable for Azerbaijan, said the economist Vugar Bayramov.

US Federal Reserve on 14 December raised its key rate to 0.5-0.75%.

Bayramov noted that the rate of world currencies has already reacted to this decision, and 1 euro fell to 1.048 dollars.

"To avoid the impact of the FRS decision on AZN is impossible. In the near future we will see how CBA has prepared for the decision of the Federal Reserve," he said.

Bayramov said that, if CBA through operational tools does not eliminate the psychological pressure, the process of devaluation of the manat will get even more accelerated.

The economist said that in view of the fact that the global oil market also reacts to the FRS decision, that decision will also influence the income of Azerbaijan. According to him, if after the decision of the Federal Reserve the United States decides to increase oil supplies to the market, sharp drop in oil prices is possible. It does not give an opportunity to stabilize oil prices despite OPEC attempts.

"In general, after the FRS decision change in oil prices will depend entirely on the US position," said Bayramov.

The expert also emphasized that, according to the FRS statement, it is planned to increase the discount rate in 2017.

"This means that the transition of the Central Bank of Azerbaijan to the liberal rate will accelerate, as the possibility of the Central Bank’s maneuver is limited. The FRS decision against the background of the dollar shortage in Azerbaijan will increase the pressure on AZN and the last month of 2016 will not be easy for the Central Bank," he said.   -----71D