Federal Reserve raises interest rates for first time in decade

That means an average rate will rise to about 16% from 15.77% now. “The divergence story will stay with us”.

Asian stock markets jumped at the open and closed the day in positive territory.

Fed policymakers now estimate rates at 1.25-1.5% by the end of 2016, 100 basis points higher than the current rate.

The renminbi may fall further against the US dollar, devaluing renminbi-denominated assets and triggering increased capital outflows, economists said.

The financial crisis became evident in 2007, ushering in deep recession not long afterwards. Gold was recovering from its lowest level since October 2009 below $1,050 struck yesterday.

“Banks are perhaps the most obvious example of the companies that are likely to benefit from rising interest rates”. They were last increased in July 2007, when they were raised by a quarter-point to 5.75 per cent. However, the forecasts released by Fed officials on Wednesday imply that she will need as much patience as the cigar-chomping Volcker did three decades ago.

On the contrary, the local currency exchange rates of emerging markets, including the lira, which reached new peaks on the eve of the Fed’s decision, increased slightly against the U.S. dollar, a matter of “profit realization”.

Firstly, the reason the FOMC has been able to take this step is that the U.S. economy is in good shape: the labour market has largely healed, the unemployment rate is back to pre-GFC levels, and the economy continues to generate decent jobs growth. However, as Caranci noted, “the headline GDP growth figure merely creates the illusion that the economic foundation is weaker than it truly is, since domestic demand will grow at a faster pace”.

“More importantly, euro rates are driven by U.S. rates only in the very short term”.

That may not be the case, Williams suggested.

The UK sales figures, it is worth noting, are no great shakes either.

There’s not much light at the end of the tunnel for long-suffering cash savers, however.

There appears to be growing evidence of a north-south gap, which is perhaps not surprising given the type of economic policies being pursued and the fact these have prevailed since 2010. That perception, the newspaper noted, is echoed in a new study from the Pew Research Center that shows the middle class (households earning between two-thirds and twice the overall median income) is shrinking and no longer the majority of Americans. So traditional way of monetary policy would be to reduce rates and provide support to the economy in time of hardship. Crucially, annual CPI inflation has been stuck in the range of -0.1 per cent to +0.1 per cent since February, way adrift of the two per cent target set for the Bank of England by the Treasury.

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