The Guardian view on US rate rises: a sterling challenge | Editorial
"The stocks were sold; the Press was squared/ The Middle Class was quite prepared." What Hilaire Belloc wrote of Lord Lundy applies double to Janet Yellen. With excellent reason. With the crybaby aristo, all that effort was spent on his career in politics; Ms Yellen, on the other hand, is doing something far more important. The head of the US central bank is busy preparing America, its new president, and indeed the world, for rising interest rates - and for a new economic era. The story of US interest rates this decade is simple to the point of tedium. The key fed funds rate has been dragging along just above zero ever since the banking crash. In December 2015, it was nudged up by a quarter of a percentage point by Ms Yellen and her colleagues at the Federal Reserve. A whole year later, they nudged it up again, which means that seven years after the notional end of the US recession it stands at mere 0.75%.
That is set to change. Over the past few weeks, rate setters at the Fed have dropped broader and broader hints that interest rates will go up as soon as next Wednesday - and will keep going up. Last Friday was the turn of Ms Yellen. Speaking in Chicago, she said: "We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect." That is about as straightforward as you get in central-bank speak. Nor is that likely to be the end of the rises: according to the Fed's charts, committee members now forecast three interest-rate rises this year alone, and more in 2018. There are geopolitical reasons to hold off making too early a move. Next month, France's presidential election, in which rightwing, anti-euro candidate Marine Le Pen is leading the polls, kicks off. Last year, the Fed held off in June before the Brexit vote.
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