Lifting of the Federal Reserve (the US central bank) the benefit of the federal funds rate 25 basis points to a range between 0.50 and 0.75 percent, and comes to raise interest rates for the first time since, for the second time in more than a decade.
According to the agency “Reuters” the Fed expects a faster pace of GDP growth and a slight decline for next year’s rate of unemployment.
She explained to media reports that the vote in the Federal Reserve Board in favor of the monetary policy statement was adopted unanimously.
It hinted at a faster pace to other increases in 2017 with the inauguration of President-elect Donald Trump Management Authority promises to boost growth by cutting taxes and increasing spending and ease restrictions.
The Reserve rate hike in December 2015 a quarter of a percentage point for the first time in 10 years, to reach between a quarter and half a percentage point, after having been a long time between zero and a quarter percentage points.
The direct impact of the interest rate is the cost of borrowing money from the Federal Reserve, which was before the global financial crisis in 2008 is limited to US banks, but it has expanded to include “exchange of criticism,” with the major central banks in Europe and elsewhere.
But the biggest impact of raising the interest rate will be on the US dollar exchange rate, which is witnessing a rise in the last two years, affecting the price of the whole world, not just on the banking and financial sector, but also on the cost of living for ordinary people in most countries of the world.
The impact of the dollar
And up the dollar exchange rate now to its highest level in a decade, and more than 40 percent to its lowest level in 2011.
An increase in US interest rates, at least a quarter percentage points, to push the dollar exchange rate to increase again, and if we take into account the expected economic policy of US President-elect Donald Trump, the dollar will continue to rise in 2017.
Although the strength of the dollar means increased cost of US debt to the world, the flexibility of the US economy and convinced investors in various parts of the earth as a healthy and strong economy it does not hurt that much for Americans to borrow and borrowing market.
But the rest of the world are affected, World Religion, estimated at more than $ 250 trillion, mostly in dollars, and there are 39 percent of global debt, the debt in dollars.
Add to that, that there are many countries follow the footsteps of the Fed’s interest is done if filed, especially countries that peg their currencies to the dollar.
The “dollar zone” around 60 percent of the world’s population and contribute about 60 percent of global GDP.
Producing countries that peg their currencies to the US dollar completely around a third of global economic output, and most commodity prices in the world are denominated in dollars, and dollar transactions constitute 85 percent of the foreign currency exchanges in the world.
Perhaps the credit market is, the bond market (especially dollar-denominated ones), the most vulnerable of the compressor to be affected by the high dollar exchange rate, there are a lot of countries, especially the emerging economies, borrowed debts of US dollar strongly suffer from the cost of repayment of those debts, and their benefits.
It is more nations emerging economies, which have already begun to suffer the burden of debt as a result of higher US dollar exchange rate of Brazil and Turkey, and there are other countries are already suffering as a result of the high dollar exchange rate, such as Venezuela, Egypt, South Africa, Indonesia, Nigeria and Chile.
China remains the countries most affected by the rising dollar exchange rate, when the Federal Reserve to raise interest rates in December, the volume of capital that came from China in the first quarter of 2016 up to 123 billion dollars.
The falling exchange rate of the Chinese currency (the yuan) over a year and a half last year, China’s reserves declined by 25 percent since 2014 and is now in the range of $ 3.1 trillion.
And not only the disruption of the balance of trade affected by China as a result of currency differences, but the most important and the most dangerous is the opposite direction to the movement of capital.
That is also the problem of emerging and least developed economies that need to flow of capital investments which do not bear an escape toward the American economy, particularly the prospects for interest rates on the dollar to raise more than now after the election of Trump as president.
The dollar and commodities
Al-Qaeda remains in the market that if the dollar rose dropped the price of gold and other minerals and dollar-denominated commodities, particularly oil.
Although the producers recently agreed to adjust the production keeps the price now is in the range 50 to $ 55 a barrel, the continued rise in the dollar exchange rate may be a pressure on the price of oil workers to return to below fifty dollars a barrel.
While producers have suffered for certain goods having to lower their prices as a result of the high value of the dollar, consumers in the rest of the world with the high cost of retail sales.