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