Thursday, March 17, 2016

Rate decision by the Fed: dare only small interest rate steps up – WirtschaftsWoche

After the global shocks on the financial markets, the US Federal Reserve wants the interest rate reins initially only tighten cautiously.

The US Federal Reserve controls a cautious approach and leaves its key rate unchanged at 0.25 to 0.5 percent. This was announced, led by Fed chief Janet Yellen on Wednesday after its March meeting of the Federal Open Market Committee of the Fed. The rise in interest rates to a normal level could for influences from the world economy be slower than planned: At the beginning of the financial markets were due to the strong economic slowdown in China and the decline of oil prices in turmoil. But even now went from the world economy and capital markets risks from, warned Yellen. They rowed in its plans to streamline the interest back just at a time when elsewhere monetary policy is fired on all cylinders. So ECB chief Mario Draghi has recently tightened the penalty rate for banks in the euro zone if these funds parked overnight at the central bank. In addition, the controversial in Germany bond-buying program will be extended and supplemented by corporate bonds. Even in Japan, the US also lags behind economically, rate hikes are not an issue.

the Fed gets out of the ultra-loose monetary policy. If the attempt fails, threatens the destruction of the entire monetary system. One comment.

Most experts had reckoned with this decision. A survey of the “Wall Street Journal” among economists had shown a probability of only twelve percent for an increase. The US key rate had seven years remains at a level close to zero. The last increase before December 2015 had returned situated almost ten years.

But already in February, had several Fed bankers about a possible end of the just introduced rate reversal expressed. First explained Fed vice chairman Stanley Fischer, the experience with penalty interest abroad are better than he would have expected. Finally, his boss Janet Yellen candidly admitted before Congress: “We will deal with negative interest rates.” This is not the most likely scenario, but the plans are not off the table.

with cheap money, the banks want to stimulate the economy. But debt and overcapacity for not doing so. The omnipotence of central banks is to go.

The Wall Street was outraged. A “malicious statement” was the grumbled Larry Shover, co-founder of an investment fund. The markets would thereby “gekilled”. In fact, the stock market crashed, especially the papers of the major banks fell sharply after the Fed statements. But now the dust has long since subsided – both at the Fed, as well as on the markets. The reason is simple: The US economy despite the global negative news. The economy is growing solidly and the situation on the labor market is still better than expected. In February 242,000 new jobs were created; the unemployment rate thus remains at 4.9 percent. A goal of its low interest rate policy – full employment – the Fed has thus nearly equaling

the Fed chief Janet Yellen is worried about the US economy. The fact that the interest rates can be rapidly increased, is no longer in sight. Many entrepreneurs annoys

In addition comes:. The good employment figures boost domestic consumption. The shopping mood of Americans remains high: The automotive industry is a month more than 1.3 million vehicles from, airlines and hotels are happy about travel bookings for the summer and fall. The Americans buy so away the worries that foments exports. Due to the strong US dollar, US suppliers could bring abroad as little products to the man as more than five years no longer. Merchandise exports fell by 3.3 percent to around 117 billion dollars. Not much better is the situation in the oil industry, which continues to suffer from low commodity prices.

Nevertheless, the overall outlook for the US economy remains positive. “I expect that the US will grow this year by about two percent – more than Germany,” says about Adam Posen, an economist from the Peterson Institute.

He stressed that the United States will benefit from having made in the 2008 financial crisis a clear cut. Banks, carmakers and airlines were sent, merged and healthy shrunk into bankruptcy. “The remaining players are now stronger there,” says Posen. For the US banks: The turmoil in Europe have pulled the US banks down. The free event, but could not, because the houses were able to convey, better position than its European competitors. This confirms a study by the accounting firm Ernst & amp; Young. Accordingly, the ten largest US banks have their capital increased since the financial crisis of 2008 by 160 percent – to over one trillion dollars. By comparison, the Europeans have bolstered their capital by only 63 percent over the same period.


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