– ‘Source of strength’ –
Analysts said the immediate policy change was only modest and were focused on how the Fed will move in the next year.
The prospect of more increases of the Fed’s rate will have a broad impact on the global financial system.
It means a higher cost of borrowing for everyone from foreign governments and companies to home and car buyers, while also better rewarding savers on their bank accounts.
The Fed argues that US businesses can continue to invest and hire with a modestly tighter dollar policy.
As for foreign economies, especially emerging markets which have already seen capital outflows and falling currencies due to the expected shift by the Fed, Yellen says they had been forewarned and are in better shape than in the crises of the 1990s.
“This action takes place in the context of a US economy that is doing well, and is a source of strength to the emerging markets and other economies around the globe,” she said.
Kathy Lien of BK Asset Management noted that “the most important monetary policy event of the year proved to be a dud for market volatility.
“This muted reaction to a historic change in monetary policy is exactly what the Federal Reserve likes to see and despite all of their critics, we see this as a credit to their proper management of market expectations.”
