Fed boldly raises interest rates
The US Federal Reserve raised the key interest rate on Wednesday for the first time in almost ten years. It now lies between 0.25 and 0.5 percent. Europe will benefit from the turnaround, some commentators believe. Others fear that the global economy is still too vulnerable to make the move worthwhile.
Good news for Europe
Europe will benefit from the rise in interest rates in the US, the centre-right daily Neue Zürcher Zeitung predicts: "This about-face in interest policy is good news for the Eurozone and for Switzerland. If the hike in interest rates makes the dollar even more attractive for investors - and more valuable as a result - it will alleviate some of the pressure on both the euro and the overvalued Swiss franc. Of course this will not prompt the European Central Bank to follow suit as far as its interest rate policy is concerned, as the economic situation in Europe is far more fragile than it is in the US. But at least it will reduce the need for an even more aggressive form of monetary easing here in Europe. In these times of a permanent state of emergency, that is at least something."
Fears of big sell-off are spreading
By introducing restrictive monetary policy the Fed is taking a different course to the ECB and this will be a two-edged sword for the Eurozone, the liberal daily La Stampa warns: "With the raise in the interest rates the dollar will go up and the euro will go down. This will help the European economy, which is heavily export-oriented. … But the more the Fed raises interest rates, the more nervous the financial markets will get. They will start selling shares and bonds and stoke fears of contagion. However, the real crises don't begin when investors start selling the weakest parts of their portfolios, but when they are so desperate that they start selling their best stock. Junk is there to be thrown away. But you only sell the family silver when the situation is really hopeless."
Global economy still very vulnerable
Following the Fed's decision to raise interest rates the centre-left daily El Periódico de Catalunya voices concern about the economies of the newly industrialised nations: "The impact on Europe will be minor. The euro will depreciate against the dollar, which will promote EU exports, and we can expect the ECB to continue with the expansive policy it was so reluctant to adopt. The emerging economies, suffering under the burden of huge debts in dollars and capital drain to their centres, will be worst hit. This comes on top of the fact that the price of oil and other raw materials are at a low, which is hurting the revenues of the producing countries. China's growth rate has been slowing for months and its stock market bubble has burst. A worrying panorama that should prompt the Fed to weigh any steps it plans to take extremely carefully. The global economy is in a very fragile state."
Seven lost years
Given the tentative nature of the recovery in the US real economy the Fed shouldn't have raised the interest rates yet, the centre-left daily The Guardian complains: "The justification for higher rates should be a real economy moving at an unsustainable pelt. There's no sign of that. ... Growth has recently been respectable, but the bounceback needs to be measured against the crash before, and in that context it is less impressive. Real GDP per head has, on average, inched up by only a fraction of a percent annually since late 2007. By any ordinary standards that represents seven lost years for living standards, and all the more so because the very rich have grabbed so much of such growth as there has been."