:00:30. > :00:40.He said's decision today reflects our confidence in the US economy --
:00:41. > :00:45.The Fed's. The chairwoman of the Federal Reserve has steered the bank
:00:46. > :00:51.into a new era. The first rate hype cycle since 2004 has begun. Her
:00:52. > :00:55.predecessor was responsible for US monetary policy during the darkest
:00:56. > :01:02.days of the financial crisis. A challenge, to navigate the recovery.
:01:03. > :01:10.During this programme, we ask if America is ready for rising rate.
:01:11. > :01:15.The financial crisis of the late 2000 was centred on American banks,
:01:16. > :01:24.and can perhaps be traced back to a key moment. The Leeman Brothers, the
:01:25. > :01:33.fourth largest investment bank, has gone bankrupt. It has been a day of
:01:34. > :01:38.turmoil after the collapse of Lehman Brothers. The collapse caused
:01:39. > :01:43.calamity and the Federal Reserve spent seven years putting the pieces
:01:44. > :01:48.together. Returning to normal was always the hope, and in 2015 to
:01:49. > :01:52.Central Bank took action. Be economic recovery has clearly come a
:01:53. > :01:56.long way, although it is not yet complete. Room for further
:01:57. > :02:02.improvement in the Labour market remains, and inflation continues to
:02:03. > :02:09.run below our long-run objective. But with the economy performing
:02:10. > :02:19.well, and expectation to continue to do so, a modest rise in the federal
:02:20. > :02:25.funds rate is appropriate. It was based on falling unemployment and
:02:26. > :02:30.inflation rising. If you keep interest rates down for too long,
:02:31. > :02:34.the pressure will continue to build up and we will continue a pressure
:02:35. > :02:40.in inflation. That could cause interest rates to rise more sharply
:02:41. > :02:44.in the future. If the Fed wants to raise interest rates in a gradual
:02:45. > :02:49.fashion, it must start sooner rather than later. Rates were kept low to
:02:50. > :02:59.stimulate the economy, and it worked. Houses are being built once
:03:00. > :03:04.again. The talk today is not of foreclosure, but prices potentially
:03:05. > :03:07.getting of themselves. During the downturn, this firm had to close ten
:03:08. > :03:12.branches and lay off thousands of workers. Now, for the first time its
:03:13. > :03:19.turnover is back to pre-crash levels. Our employees took a big pay
:03:20. > :03:27.cut and I went without salary for three years. But we were determined
:03:28. > :03:32.to get through it, and we did. America's car industry also made it
:03:33. > :03:37.through. Here in New Jersey, the talk is no longer of downsizing and
:03:38. > :03:44.sales crashing, but of expansion and profitability. Dealerships like this
:03:45. > :03:48.one are once again buzzing. The economy is coming back in
:03:49. > :03:56.stabilising. That fear factor isn't there. Consequently, people are
:03:57. > :04:01.getting what they want and enjoying life. With interest rates higher,
:04:02. > :04:04.everything from car loans to mortgages will be a bit more
:04:05. > :04:11.expensive. Does that make a difference to you? It does, but I
:04:12. > :04:16.will make it work. You are always trying to find a good deal. It makes
:04:17. > :04:20.this man's job a bit harder. As inventory manager, he must
:04:21. > :04:26.anticipate what the customer wants before they walk in the door. The
:04:27. > :04:35.prices can be quite different depending on features. The interest
:04:36. > :04:39.rate change can push your price from $299, and that makes a big
:04:40. > :04:44.difference. So, people may not pay the extra money? That's right.
:04:45. > :04:52.People come in with a set price in mind. Even with high interest rates,
:04:53. > :04:56.2016 is expected to be a bumpy year. The Fed 's move was widely
:04:57. > :05:02.publicised. Many banks had already taken steps to price the increase
:05:03. > :05:06.into some loans and saving rates. For borrowers, whether it's car
:05:07. > :05:11.loans or home loans, it perhaps means there is not too much to fear.
:05:12. > :05:15.But it is not much of a reason for savers to smile. And even more
:05:16. > :05:24.reason to be unhappy for American exporters. The rush is on to fill
:05:25. > :05:30.holiday orders. This masks a deep concern, whether America's
:05:31. > :05:34.manufacturing revival will continue. Here, they make awards, notebooks
:05:35. > :05:38.and other products. One third of them are sold in countries around
:05:39. > :05:47.the world, including come at a. In Canada, we have lost around $125,000
:05:48. > :05:55.in revenue this year. Simply because the department can no longer afford
:05:56. > :06:00.our parts at these costs. This allows us to separate oxygen from
:06:01. > :06:04.the air. Imagine how hard it is to sell big-ticket items. This exporter
:06:05. > :06:12.only sells a handful of these machines each year. The sharp rise
:06:13. > :06:16.of the US dollar in 2015, combined with the rate hike, is holding it
:06:17. > :06:19.back. The strength of the dollar is very significant for us in terms of
:06:20. > :06:25.our competition. It translates to anyone that was manufacturing in
:06:26. > :06:32.Europe, would have about a 30% cost advantage. This economist doesn't
:06:33. > :06:38.see much light at the end of the tunnel for US exporter 's. That's
:06:39. > :06:51.where the Achilles heel of the US economy is. Manufacturing, it is the
:06:52. > :07:00.most vulnerable area. Rates were kept low to help the millions of
:07:01. > :07:05.Americans looking for work. But it also brought a lot of cheer to Wall
:07:06. > :07:10.Street. It's a strange monster, for the Feds to be at zero. Along. It
:07:11. > :07:19.means that money was free to borrow for bank to bank. -- from. Much of
:07:20. > :07:23.that free money flowed into equity markets, making a decision to raise
:07:24. > :07:28.rates one of the most closely watched events in year 's. The
:07:29. > :07:32.Federal Reserve raising interest rates for the first time in nearly a
:07:33. > :07:40.decade. It is sending Wall Street soaring. Some traders were relieved
:07:41. > :07:46.with the certainty a rate hike delivered. It was wonderful. It
:07:47. > :07:53.meant that everyone who has been on the sidelines, everyone who has been
:07:54. > :08:00.cautious, everybody with big expectations, everybody who needed
:08:01. > :08:04.some closure on this rise, it needed it to be closed. Given the bumpy
:08:05. > :08:10.ride this year, the committee was clear. They didn't intend to take
:08:11. > :08:14.the risk of moving too fast. Janet Yellen has made it clear her goal is
:08:15. > :08:19.to have a long expansion. They have to allow markets to adjust. There
:08:20. > :08:23.are always unintended consequences, because you are using tools in a
:08:24. > :08:27.magnitude they have not been used in before. They are worried about the
:08:28. > :08:40.unintended consequences. How will markets react? So, the error of free
:08:41. > :08:46.money is over. To erase cheap credit without damaging the economy, rates
:08:47. > :08:53.will continue to rise, but gradually -- era. It is a validation of the US
:08:54. > :08:59.economy's return to some kind of strength. The challenge now for
:09:00. > :09:01.Janet Yellen and her colleagues is to manage the risks and deliver a
:09:02. > :09:12.complete recovery. A huge fire has engulfed part
:09:13. > :09:15.of a luxury Dubai hotel, near where people had gathered to watch a
:09:16. > :09:18.New Year's Eve fireworks display. The blaze started on the 20th floor,
:09:19. > :09:21.and within minutes there was