:00:00. > :00:17.Now on BBC News all the latest business news live from Singapore.
:00:18. > :00:23.The Fed declares victory on America's economic recovery with the
:00:24. > :00:29.first interest rate hike in nearly a decade. The economic recovery has
:00:30. > :00:36.clearly come a long way, although it is not yet complete. Asian markets
:00:37. > :00:46.surge on news but how will the decision affect us in the region? We
:00:47. > :00:53.have a special report. Welcome to Asia Business Report. It is the
:00:54. > :00:57.decision we've been waiting for and the vote was unanimous. The central
:00:58. > :01:01.bank has raised the cost of borrowing for the first time in
:01:02. > :01:07.almost a decade. It is only by a quarter of a percent. However it
:01:08. > :01:11.ends of the historic era of ultralow interest rates at near zero. Though
:01:12. > :01:15.it has long been anticipated it could affect markets and currencies
:01:16. > :01:20.around the world. Let's hear from the Fed chair can it and the reasons
:01:21. > :01:24.behind the increase. -- Janet Yellen. This action marks the end of
:01:25. > :01:31.an extraordinary seven-year period during which the Fed rate was held
:01:32. > :01:34.almost at zero to support the recovery of the economy from the
:01:35. > :01:40.worst financial crisis since the great depression. It also recognises
:01:41. > :01:45.the considerable progress that has been made toward restoring jobs,
:01:46. > :01:53.raising incomes and easing the economic hardship of millions of
:01:54. > :01:57.Americans. And it reflects the committee's confidence that the
:01:58. > :02:03.economy will continue to strengthened. The economic recovery
:02:04. > :02:07.has clearly come a long way although it is not yet complete. Room for
:02:08. > :02:10.further improvement in the labour market remains and inflation
:02:11. > :02:16.continues to run below the long-running objective. Bite with
:02:17. > :02:21.the economy performing well, and expected to continue to do so. The
:02:22. > :02:26.committee judged a modest increase in the Fed rate target is now a
:02:27. > :02:32.appropriate -- but. That recognises that even after this increase,
:02:33. > :02:38.monetary policy remains accommodative. She went on to say
:02:39. > :02:44.that any further increase is would be gradual. Let's look at how
:02:45. > :02:52.markets were reflected after this. They ended up 1%. The US dollar also
:02:53. > :02:57.edged higher after a volatile day of trading. In Asia, all markets are
:02:58. > :03:03.reacting positively with the Japanese Nikkei up 2%, Australia up
:03:04. > :03:07.1%. Markets in Hong Kong and China have just started trading. Let's go
:03:08. > :03:12.live to Hong Kong where our correspondent is standing by.
:03:13. > :03:16.Firstly, the monetary authority of Hong Kong has raised the cost of
:03:17. > :03:25.borrowing. We should save a dollar is pegged to the US dollar. What has
:03:26. > :03:30.been the reaction so far? Well, the Hong Kong stock market has just
:03:31. > :03:37.opened. It was a moderately positive response. The benchmark Hang Seng
:03:38. > :03:43.index opened 0.7% higher. The China related indices doing a little bit
:03:44. > :03:45.better. Clearly not quite as positive as other stock markets in
:03:46. > :03:52.the region but I think the reason for that is, as you mentioned, Hong
:03:53. > :04:01.Kong's central bank has become probably the first in Asia to hike
:04:02. > :04:05.its benchmark lending rate to 0.75%, which was widely expected because of
:04:06. > :04:10.the Hong Kong dollar has maintained a peg to the US dollar for a couple
:04:11. > :04:14.of decades now. Essentially, what that means, is interest rates are
:04:15. > :04:23.closely tied to what is happening in America. What that means for the
:04:24. > :04:27.broader economy is a question mark. Many sectors in Hong Kong have seen
:04:28. > :04:33.a slump, for example, tourism and retail, and Hong Kong is facing
:04:34. > :04:36.slower Chinese growth rates in two decades. Perhaps rising interest
:04:37. > :04:42.rates is not the best scenario for the city at the moment. At the same
:04:43. > :04:45.time, prices are still incredibly high, property prices have more than
:04:46. > :04:50.doubled since the global financial crisis. So I think you will see a
:04:51. > :04:56.lot of consumers, especially people looking to purchase homes, I think
:04:57. > :05:00.cheering the fact that property prices may be on the way down. What
:05:01. > :05:06.about businesses in Hong Kong and also in China Bass how will this
:05:07. > :05:13.rate hike Fx then? -- and also in China? -- affect them? Good
:05:14. > :05:18.question. It is not entirely clear right now. The central bank has
:05:19. > :05:23.raised its benchmark lending rate to other banks by there is a question
:05:24. > :05:27.mark over whether commercial banks will pass the higher cost to
:05:28. > :05:30.customers. There is quite a lot of liquidity in the market, in part
:05:31. > :05:36.because of what's been happening with the Chinese yuan, with more
:05:37. > :05:40.money flowing into Hong Kong since some are, so there is actually a
:05:41. > :05:44.possibility that banks may not be raising the rates it charges its
:05:45. > :05:52.customers which would be good for many businesses. Thank you. Earlier,
:05:53. > :05:59.I spoke with the governor of the central bank of Sri Lanka on webcam
:06:00. > :06:03.to get his reaction. Capital has been flowing out of the emerging
:06:04. > :06:09.markets towards the United States for most of this year. And this
:06:10. > :06:14.decision by the Fed, although it was well anticipated and well signalled,
:06:15. > :06:19.is not going to change that very much. So, as a central bank
:06:20. > :06:23.governor, my job is basically trying to forestall a lot of that money
:06:24. > :06:31.flowing out of our country towards the developed markets. And what
:06:32. > :06:36.about the impact on the currency market? We've seen the US dollar
:06:37. > :06:40.strengthened already after the rates decision. In deep, so, what happens
:06:41. > :06:45.is our currencies have weakened across the board in Asia, some more
:06:46. > :06:49.spectacularly than others. And this means that the living standards of
:06:50. > :06:53.ordinary people in countries across the emerging world have been
:06:54. > :06:57.declining. That is because purchasing power in their local
:06:58. > :07:01.currency has declined. It has political effects as well. And I
:07:02. > :07:08.guess it makes your job rather tricky because you want to keep the
:07:09. > :07:10.interest rates in the balanced position and also you have to
:07:11. > :07:16.monitor inflation in your own country as well. That's right. You
:07:17. > :07:21.have a sort of feedback effect. As they say, living standards fall, the
:07:22. > :07:27.government tries to spend more on social security and subsidies and
:07:28. > :07:34.suchlike, and so you may have a high threat of inflation than would have
:07:35. > :07:37.been the case. We have to try to monitor the situation and if
:07:38. > :07:42.necessary the central banks might see some tightening into the New
:07:43. > :07:47.Year. The interest rate rise is not just a matter for central banks, the
:07:48. > :07:58.markets and investors. How will it affect everyday life in Asia? Our
:07:59. > :08:03.correspondent has a look. What do so -- soymilk pudding, Star Wars have
:08:04. > :08:05.to do with the Fed reserve? Well, the decision on interest rates
:08:06. > :08:13.serves up worries for folks in many parts of Asia. Take this man, who
:08:14. > :08:19.owns a soymilk pudding franchise in Kuala Lumpur. His currency, the
:08:20. > :08:25.Malaysian ringgit, will likely fall, which is bad for business. We import
:08:26. > :08:29.raw materials from Singapore, which is a US do nominated currency. Any
:08:30. > :08:36.currency fluctuations will directly affect us. We can't increase our
:08:37. > :08:41.prices as willy-nilly as any other industry. It is a very competitive
:08:42. > :08:45.industry, so our prices have to maintain, but costs keep rising
:08:46. > :08:50.higher and higher. But it is more than just a business issue. The US
:08:51. > :08:54.Fed moves strike at the heart of the Malaysian middle-class. For this
:08:55. > :08:59.mother of two a rising US rates means that sending both of her
:09:00. > :09:07.children overseas to university may no longer be possible. That currency
:09:08. > :09:13.really had to make me rethink and plan. It will be unfair. It gives me
:09:14. > :09:18.heart pain. We are still thinking whether we can do anything more for
:09:19. > :09:21.our children. This was once a booming economy thanks in part for
:09:22. > :09:27.the cheap money that poured into the market. Now all of it has changed.
:09:28. > :09:30.In anticipation of higher interest rates in the US, investors have
:09:31. > :09:34.started pulling their money out, which has had a knock-on effect on
:09:35. > :09:38.everything from the stock market to the currency. But Malaysia is not
:09:39. > :09:41.the only country in the region feeling this pain. Here in Singapore
:09:42. > :09:46.the concern is higher interest rates in the US could push up the cost of
:09:47. > :09:52.borrowing, and other countries like Indonesia, India and Australia might
:09:53. > :09:58.also be affected. But it is not the first rate rise that has people
:09:59. > :10:01.worried. More might be on the way. Historics suggest whenever the US
:10:02. > :10:09.raises rates it is followed by a series of interest rate rises. From
:10:10. > :10:18.that point of view, even though we are very prepared, there can still
:10:19. > :10:22.be some element of surprises. What shouldn't surprise you is that Star
:10:23. > :10:25.Wars, which premiered in Asia overnight, will dominate
:10:26. > :10:29.conversations on Thursday. The film is a reminder of how pervasive
:10:30. > :10:36.American influence is here and how much of a forced the US Fed is in
:10:37. > :10:42.this part of the world. -- "Force." That is it for this edition of Asia
:10:43. > :10:47.Business Report. Thank you for watching.
:10:48. > :10:49.The headlines: The United States Federal Reserve has unanimously
:10:50. > :10:52.decided to raise interest rates for the first time in nearly ten years.
:10:53. > :10:57.The Fed raised its key rate by a quarter of a percentage point,