Emerging Economies And The Fed Rate Hike Essay - 1496 Words

Emerging Economies and The Fed Rate Hike Conundrum The U.S. Federal Reserve is expected to begin to gradually raise policy interest rates in the near term, an event widely referred to as â€Å"liftoff†. As markets over the world gear up for the first ever rate hike by Federal Reserve in a decade, the economist and policymakers still seem to be in two minds over its impact. The ongoing American recovery, supported by recent job market data has made the case for a hike even stronger. On the other hand, many experts are cautioning against the possible implications on the world economy. Weather Fed hikes rate on 17 September or not, most agree that sooner or later, a hike is imminent. This has fueled growing fear of renewed volatility in emerging economies’ currency, bond, and stock markets. The concern is understandable: When the Fed signaled in 2013 that the end of its quantitative-easing (QE) policy was forthcoming; the resulting â€Å"taper tantrum† sent shock waves through many emerging countries’ financi al markets and economies. What does a rising interest rate in USA symbolize? The end of easy money. Since the start of the financial meltdown crisis triggered by the collapse of Lehman Brothers, the US Federal Reserve has resorted to various measures to pump in liquidity in the economy. Three rounds of so-called Quantitative Easing (QE) failed to bring in the required impact on the economy. Though the Fed has withdrawn the QEs, they kept the ‘easy money’Show MoreRelatedShould The Fed Raise Interest Rates Now?1372 Words   |  6 Pagesinterest rate cycle came to an end in December 2015 with a hike of 25 basis point by the Federal Open Market Committee. It was a much anticipated move for a while, and now the debate is on the roadmap of future interest rate hikes. Several economist, analyst, and media personalities have expressed a variety of opinion on both ends of the rate hike. Should the Fed continue to raise interest rates now, is the question of global consideration. In my opinion, Fed should continue to raise interest rate nowRead MoreThe He alth Of The Current U.s. Economy884 Words   |  4 PagesSituation: The health of the current U.S. economy appears to be growing gradually. The second quarter real GDP growth was 3.7% and the unemployment rate declined to 5.3%. The U.S Federal Reserve (Fed) is expected to raise interest rates in the near future when it sees clear signs of strong economic growth and improvements in the job market. The last time the Fed raised interest rates (to 5.25%) was in 2006. This move was soon reversed as the 8 trillion dollar housing market bust sparked the globalRead MoreThe Prices Hike Effects Over Brazil s Economy1824 Words   |  8 Pagesinterest rate hike effects over Brazil’s economy Introduction The market is looking forward to the next meeting of the Federal Open Market Committee (FOMC). During the meeting the committee will announce whether they will increasing or not the target interest rate in the US, which is now between 0.00 - 0.25% per year. The two main factors that the FOMC considers when taking this decision are the inflation, and unemployment rates in the US. 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Federal Open Market committee (FOMC) lifted the target range for the Federal funds rate to  ¼ to  ½ percent. Initially, this paper outlines the core marks from December 2015 meeting statement and compares them to the one from January 2016 meeting statement. Later, this paper acclaims Fed’s decisionRead MoreSeptember Federal Open Market Committee1788 Words   |  8 PagesDecember Fed Rate Hike Remains in Play Many observers believed that the 27-28 October Federal Open Market Committee (FOMC) meeting would be a non-event, largely due to the fact that there was no scheduled press conference after its conclusion. In fact, the press statement revealed some interesting insights into the current line of thinking of FOMC members. Most importantly, it is abundantly clear that the vast majority are still inclined to raise the federal funds target at the 15-16 December policyRead MoreHow Can Interest Rates Go Lower Than Zero?867 Words   |  4 Pagesworld’s leading economies have begun to transition away from near zero interest rates. In December 2015, the Federal Reserve announced they would be raising interest rates and followed through in January 2016. Raising interest rates indicate to the world that economic growth is stabilizing and avoids inflating a bubble of cheap credit. While it was only a matter of time before the United States raised interest rates, some experts believe this hi ke was premature. The interest rate hike, amongst manyRead MoreBroken Monetary Policy Analysis1463 Words   |  6 PagesFed Remains Wary of Broken Monetary Transmission Mechanism During the early stages of quantitative easing by the Fed, many commentators doubted the ability of monetary policy to gain traction in the real economy. The collapse in the velocity of circulation of money was cited as unambiguous evidence that the US economy was firmly in the grips of a liquidity trap. Normally, money velocity moves pro-cyclically as the number of transactions increase as the economy expands. Thus, the sheer size of theRead MoreThe Value Rates Policy ( Nirp ) Which Are Been Adopted With A Price Stability? Essay1691 Words   |  7 PagesThe measure taken to lower interest rates below zero, constitutes the negative interest rates policy (NIRP) which are been adopted with a price stability objective. In ensuring stability of prices Central Banks aim for low inflation rates. Despite, the aim for low inflation, the rates need to be significantly below but also close to 2 percent. The European Central Bank (ECB) influences inflation by effecting changes on the interest rates. Even so, despite the risk of conflating the nominal lowerRead MoreFiscal Policy And Monetary Policy2086 Words   |  9 Pagesmacroeconomic policy lead by the central bank. Expansionary monetary policies can help boost the economy but it will cause inflation. There are two approaches to control money supply; there are price and quantity. Price represents interest rates and quantity means amount of money quantity. After financial crisis, U.S. interest rates already reached a low point. As a result, the only effective way to boost the economy was by increasing money supply. In other words, the U.S. government would printed money and