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  • The clock is ticking for the Federal Reserve.

  • The US Central Bank is considering increasing interest rates because the economy has strengthened and Central Bank has believed,

  • there is a growing risk that inflation may eventually get out of control.

  • Currently interest rates are near zero and FED officials have stressed that the first increase would be small and following ones, gradual.

  • The rate high would be the first since the 2008 financial crisis,

  • and it may pave the way for the Bank of England to go the same way.

  • However, all the central banks in the Euro Zone, Japan, and China are unlikely to raise rates for quite some time,

  • meaning that the year of cheap money globally is not completely over yet.

  • Were the FED to hike rates, US consumers and businesses would face higher borrowing costs on their loans.

  • The value of the dollar would rise as more investors would put money in the US chasing higher returns.

  • This matters for companies around the world that have borrowed in dollars, as they will find these loans harder to repay.

  • Then there is the question of the how financial markets would react, some fear there may be wide-spread panic,

  • one thing that the FED exactly has been trying to avoid.

The clock is ticking for the Federal Reserve.

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When interest rates will rise explained | FT World

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    Reina posted on 2015/09/15
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