Sunday, September 27, 2015

U.S. Federal Reserve Keeping Interest Rates Steady: Good for The Global Economy?

Even though it raised uncertainty in the stock markets, does the Fed decision to hold interest rates steady be eventually good for the global economy? 

By: Ringo Bones 

Even though economists has describe the Fed’s decision to keep interest rates steady as “dovish”, many also said that the Fed chair Janet Yellen deciding to hold interest rates steady after their September meeting could eventually be good for the global economy in the long run for a number of reasons. Even though the rise of “emerging economies” during the past few years is largely fueled by the infusion of “cheap money” by the world’s various central banks adopting the policy of quantitative easing as an exit strategy from the global credit crunch of 2008.  

Many said that global economic worries – especially the China economic slowdown – is the main reason why the Fed decided to hold interest rates steady for now despite promising that sometime before the end of 2015 it might raise the cost of borrowing money. Other said that if the Fed decided to raise interest rates after their September meeting, the recent employment rate recovery of the United States could be affected negatively, but the main beneficiary of the Fed keeping the cost of borrowing money at an all time low could be emerging economies and other small economies elsewhere in the world. 

Bangko Sentral ng Pilipinas (B.S.P.) – the Philippine’s central bank – Governor Armando M. Tetangko, Jr. recently said in an interview that inaction from the U.S. Federal Reserve will ease some pressure off the Philippine government paying off its billions of dollars worth of debts from the United States, thus allowing the Philippine economy an easier time and use those funds intended for debt servicing to be invested into something more economically viable.    

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