So was the US Rate rise a non-event or globally significant? The recent increase in interest rates by Janet Yellen, the Governor of the Fed, from 0.25% to 0.5% may on the surface appear an insignificant change. But in fact it has far reaching global concequences. This was the first time the US have raised rates since June 2006, therefore ending their policy of low interest. It must be pointed out though that 0.5% is in itself extremely low still, but it does signify a possible shift in thinking by the Fed and we could see rates creep up slowly over time. The magic warning number these days is 4% – where if that does happen I am reliably informed that we should sell everything including the kitchen sink! Janet Yellen sees rates at 3 1/4% by 2018.
The immediate impact on the markets was sort of a non-event. They had been pricing in such a rise since September, so there were no real surprises which kept most things stable and allowed traders to focus on the fundamentals.