Thursday, 17 December 2015

The FED raises interest rate by 0.25%.

After 7 years of near zero interest rate, the Fed raises interest rate by 0.25% from 0.25% to 0.5%.

Reasons given for raising interest rate today are:

  • GDP growing at 2% to 2.5% sustainably for some time.
  • Employment has dropped from 10% to 5%.
  • Inflation is still below the 2% target at 1.3%, but the Fed wants to be ahead of the curve.

To understand the action of the Fed better, watch this very instructive video on the yield curve.

What is a yield curve?

For those who wish to understand the Fed better, watch this video.

What is the FED?

US economy has improved.  Consumer spending, autocar buying and housing sector activities are up.  Wages have not risen much so far.

Read also this very good post:

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