FED raises interest rates: US economy on path to full recovery

The US Federal Reserve has raised interest rates by 0.25 percentage points. According to US media, this decision could affect developing countries and will in any case strengthen the dollar. 

The US Federal Reserve (FED), after eight years, decided to raise interest rates by 0.25 percentage points to 0.25-0.50 percent, announced at a press conference by Janet Yellen, Chair of the FED, as reported by the news agency Patria.

Although not publicly discussed for now, there are indications that US debt is also seriously decreasing.  This decision will certainly have an impact on financial markets, as well as on the global economy, because there is a possibility of capital returning to the US, which could particularly affect developing countries. It was also announced that the interest rate is expected to be 1.375 percent by the end of 2016.

The increase in interest rates will directly harm developing countries, primarily Brazil and China. Companies in these countries have borrowed during the period of a cheap dollar, so central banks will have to intervene to prevent illiquidity. The dollar will strengthen, and capital will return to the United States.   

The decision to raise interest rates was justified by the good condition of the labor market in the United States and expectations that inflation will rise to the target level of 2 percent, which is a decent level for increasing exports and economic development, writes NAP.