17/12/2015 World Business Report

Now for the latest financial news with Sally Bundock and

Markets surge as the US raises interest rates for

Plus - from soya puddings, to school fees, to Star Wars - how

people across the world will soon be feeling the Force of the Fed.

I'm Sally Bundock - also in the programme:

Hong Kong follows the Fed and raises its interest rates.

Our team in the region will have all the reaction from Asia.

We start of course with the big news affecting markets, businesses

We have been talking about it for months but

America's central bank - the US Federal Reserve -

has raised the cost of borrowing for the first time in almost a decade,

signalling the end of the era of ultra-cheap money that has had a

Let's take a look at the detail.

The Fed has increased the range of its benchmark interest rate

That determines what banks charge each other to borrow money

That is the first move for quite some time.

It's now between a quarter and a half of a percent.

It's a small step - but is it the first of many rises - are US

This was Janet Yellen's wording, we will proceed readily. That has

reassured investors. She said the process was likely to be gradual,

just what they wanted to hear. Policymakers at the Fed say that

the cost of borrowing is likely to be just under 1.4%

by the end of 2016. That implies four more

rises next year. Traders are betting

the next move will be in April. That's of course assuming the US

economy remains in good health. Michelle Fleury was at the Fed

in Washington. For many, the rate increase was a

vote of confidence in the US economy at a time when the rest of the world

is still struggling. It reflects the progress being made in the labour

market, and America's return to some kind of growth. The recovery is not

yet complete. Acknowledging that inflation is still below its desired

level, Janet Yellen was at pains to stress future interest rate rises

will be gradual. The committee expects the economic conditions will

evolve in a manner that would warrant only a draw increases in the

federal funds rate. The federal funds rate is likely to remain for

some time below levels that are expected to prevail in the longer

run. Wednesday's move may be small, but it is a step towards returning

to some kind of normal for the US economy, and future steps are bound

to attract as much speculation as this one.

The impact of that decision from the Fed is being felt across the world.

Let's go to Singapore now and talk to our Asia business

Markets are up strongly, but we have also had a move

Yes, and to be honest, that should have been expected as well, it was

Hong Kong regularly tracks what is going on in the USA. We have also

seen investors in Asia really breathing a sigh of relief that this

decision that everyone has been waiting for for the entire year has

finally been made, and taking some heart from the fact that the future

rate rises are likely to be gradual. Remember that this is very important

for emerging economies in Asia. Many of whom's currencies often

depreciate once you see a US rate rise. You have seen the dollar

flight in this part of the world, but it is at the top of many

investors' mind how it will impact their currencies in the future. In

terms of normal everyday people, you have been out there assessing what

it means for them. Yes, Sally, it is a big issue for many businesses and

consumers in Asia. Back to that currency problem, as the US rates go

up, many currencies in the region can to fault. That is having an

impact on businesses and consumers in the region. What do so milk,

pudding, education and Star Wars have to do with the US Federal

Reserve? The decision on interest rates is serving up worries for

folks in many parts of age. Take this man. He owns a solo work --

soymilk winning franchise. His currency will likely fall, and that

is bad for business. We import our war materials from Singapore, so any

currency fluctuations will affect us directly. -- wrote materials. We

can't increase our prices as much. It is a competitive industry. Our

costs keep rising higher and higher. It is more than just a business

issue. These moves strike at the heart of Malaysia's middle-class,

but this mother of two, both of her children bring overseas to

university may no longer be possible. I will have to plan

differently. We are thinking whether we can do anything more for our

second child. This was once a booming economy, thanks in part to

the cheap money that poured into this market. Now all of that has

changed. In anticipation of higher interest rates in the US, investors

have started pouring money out, which has had a knock-on effect on

everything from the stock market to the currency. Malaysia is not the

only country filling this pain. In Singapore, the concern is that

higher interest rates could push up the cost of borrowing, and other

countries like Indonesia, India and Australia may be affected as well.

It is not the first rate rise that has people worried. More may be on

the way. Whenever the US chooses to raise interest rates, it tends to be

followed in a series of interest rate rises. From that point of view,

even though we are very prepared, it can leave some element of surprise.

What should not surprise you is that Star Wars, which premiered in Asia

overnight, will dominate conversations this Thursday. The

film is a reminder of how pervasive America's influence is here, and how

much of a force the reserve bank is in this part of the world. In terms

of reaction, the markets obviously stronger, but as I mentioned, the

Hong Kong monetary authority has raised its base rate for the first

time in nine years. The cost of borrowing going up following the

move from the US Federal Reserve overnight. In Hong Kong, the

currency is pegged to the US dollar, so the monetary authorities do tend

to move in line with the Federal Reserve. That is not unexpected in

itself, but the Hong Kong key rate has been raised to 0.75% from 0.5%.

Argentina is to scrap foreign exchange restrictions,

allowing individuals and companies to buy dollars freely

The move comes six days after pro-business

President Mauricio Macri took office promising deep economic reforms.

capital leaving the country - but critics say they have hurt exporters

The value of the peso is now expected to slump from less than 10

to the dollar - the official exchange rate - to as low as 15,

The price of the average UK home will rise by 50%

in the next 10 years, according to a report by the National Association

of Estate Agents and the Association of Rental Letting Agents.

That would put the national average price at ?419,000 by 2025.

London house prices are forecast to nearly double to ?931,000.

The research assumes prices will continue to rise as they

That is quite a scary thought. Let's show you the markets. You can see

the reaction. This is the bounce back. Japan at almost 2%. The

trading day in Tokyo is almost over. Oil is falling, just over $37 a

barrel at the moment. That is the close on Wall Street. The comments

about the jaw moves in the future but they boosted investor sentiment

-- gradual moves. Sports activities for children

as young as five are to receive more government funding

as part of the first new government Sport England's remit is being

changed, with more money going directly to charities and community

groups to get people active.