Weak the dollar can declare FRS "a checkmate "

When the Federal Reserve speaks about the risks menacing to economy, whether it be delay of growth or inflation increase, as a rule, in any of cases or even in both it only the assumption. But what if there are both risks? That if to economy of the USA threatens both growth delay, and inflation increase - the double diagnosis at which each of symptoms needs to be treated separately. Yes, here also risks are concealed, chairman FRS Ben Bernanke in the performance before the Congress last week has noted. "the committee recognised, that both objects in view - preservation of as much as possible high occupation level and price stability - remain under the threat ", has told Bernanke, expressing the point of view of members of committee on a monetary and credit policy following the results of session on October, 30-31th. Bernanke has listed the possible reasons of deterioration and without that unfavourable forecast FRS on economic growth: The further destabilization in the financial markets, toughening of standards of crediting, prompt falling of the prices for habitation which suppresses readiness of consumers to spend money, and also reduction of investments of the enterprises in reply to dying away economic prospects. As to inflation, that, according to head FRS, the main suspects representing potential danger are dizzy prices for oil both the other raw goods and falling of the rate of exchange of dollar. Such price changes, most likely, are signs, but not the reasons. It is relative shifts of the prices (in a case with the raw goods), but not inflation as that more likely. FRS does not specify, with what she sees relationships of cause and effect between a monetary and credit policy and the prices. So, how much seriously the weak dollar can undermine carefully developed plans FRS on recession prevention? Economists were divided in opinions in a question of influence of dollar into inflation and the further course of a monetary and credit policy. The following step? "Now to economy have put the shah, and further it is threatened with a floor-mat ", the director of department of economic researches in Northern Trust Corp speaks. In Chicago Floor Kezril. The dollar becomes a figure which will make "a checkmate ". Problem Bernanke consists that if it will reduce rates the dollar will continue to fall even more strongly. It is not excluded, that it cannot support economy the same as it was possible to its predecessor ". And in it there is nothing good, because, if Kezril the rights, on the person all signs of movement of economy towards recession: two months of low sales in trading networks, growth of real consumer expenses in September of all on 0.1 %, the index which has fallen from high levels of Institute of management of deliveries (ISM), sharp falling of trust of consumers (for last year the index of trust of Michigan university has fallen to 22 %). Alarm signal Plus to all the indicator recessions Kezrila (indicator KRWI) burns yellow light. Both components - a spread between the rate on federal funds and profitableness under 10-year-old exchequer bonds of the USA and the monetary base corrected on inflation (currency plus bank reserves) - have entered into negative territory that preceded each recession, since 1970. (Kezril uses annual change of quarter average value of monetary base and average value for 4 quarters for a spread). Last three quarters on end indicator KRWI stayed in a negative zone. Probably, not in such far future FRS it is necessary to choose between currency and all economy. In spite of the fact that everyday falling of dollar to new minima not so good advertising for the country or its economy, it can and not have essential inflationary consequences, Stephen Chekketti, the professor of the international economy of university Brandejsa and the former director of research department FRB of New York considers. "I do not see the bases to consider, that dollar depreciation conducts to inflation occurrence ", speaks CHekketti. There is a practical rule: dollar falling on 10 % conducts to growth of an annual consumer price index on 0.1 % for two years, he speaks. In a basket of the basic currencies the dollar for this year has already fallen in price on 9 %. According to CHekketti, the weak dollar strikes blow not how much to inflationary front, how much on front of economic growth. For the present under the control Pure export (export a minus import) has added on the average 1.1 percentage points to a total internal product in the second and the third quarter this year. Export of goods has added 1.7 percentage points - the biggest contribution almost for 30 years. And sales of the American exchequer bonds from National Bank of China, can lead to opposite consequences and to emergency sales under below cost prices, speaks CHekketti. The main danger is represented by a dollar collapse. First, participating in formation to a monetary and credit policy are not happy with chaotic market movements. And, secondly, there is a risk, that inflation expectations suddenly will start to progress. Meanwhile signs of such succession of events practically are absent. It is expected, that, since present time, within five years inflation will grow on 10 basic points in comparison with level on the beginning of current year the size of 2.47 %. It more low, than on August, 17th when FRS for the first time has taken measures concerning problems of liquidity and deterioration of conditions of crediting and has lowered the discount rate on 50 basic points. Subsequently FRS has lowered the basic interest rate on 50 basic points on September, 18th and on 25 basic points on October, 31st to current level of 4.5 %. Credit peripetias Besides, the events occurring in the credit markets, have deflationary character. Easier speaking when creditors sustain large losses, they cannot give out credits. Taking into consideration that fact, that has twirled financial sector in a whirlwind of losses on substandard mortgage, and also to the securities connected with them, hardly crisis will manage to be constrained. In a risk zone there were foreign credit organisations, and economic growth was slowed down in Japan and Europe that can have consequences for national currencies. Probably, against it choice FRS will be reduced, and the bank will prefer to throw out dollar for a board to stabilise economy of the USA. Carolina Baum Agency Bloomberg Forexpf. Ru - Forex News / news Forex