Wednesday, December 16, 2015
Economy: Federal Reserve - Better Late Then Never!
I think this step was necessary. A zero interest rate was appropriate for the crisis, but doesn`t fit to a solidly growing economy. The US job market is advancing (about 200,000 new jobs per month, unemployment rate at 5.0, wages are climbing about 2% annually), retail sales are recovering (a sign that consumers are responding to cheaper energy) and the service sector - the engine of the economy - is expanding. The core inflation (without energy & food) climbed to 2%. And China, the other center of the global economy, is recovering (industrial output & retail sales are gaining more speed driveby).
Keeping the zero interest rate policy would have given the wrong signals to investors and consumers. I think that Fed´s indecision in the recent months created some uncertainty and was holding back stock market & economy.
Today`s very modest interest rate hike demonstrates confidence into the economy - but keeps loans still inexpensive. By demonstrating more optimism the Fed is encouraging investors, consumers and (potential) employers. I think today´s decison will support economic growth in the US which could also pull the sluggish global economy. No wonder that the US stock market rallied after the Fed declaration and closed with a daily gain of 1.5%. Thank you Mrs. Yellen & Co.