01/01/2016 World Business Report

He said's decision today reflects our confidence in the US economy --

The Fed's. The chairwoman of the Federal Reserve has steered the bank

into a new era. The first rate hype cycle since 2004 has begun. Her

predecessor was responsible for US monetary policy during the darkest

days of the financial crisis. A challenge, to navigate the recovery.

During this programme, we ask if America is ready for rising rate.

The financial crisis of the late 2000 was centred on American banks,

and can perhaps be traced back to a key moment. The Leeman Brothers, the

fourth largest investment bank, has gone bankrupt. It has been a day of

turmoil after the collapse of Lehman Brothers. The collapse caused

calamity and the Federal Reserve spent seven years putting the pieces

together. Returning to normal was always the hope, and in 2015 to

Central Bank took action. Be economic recovery has clearly come a

long way, although it is not yet complete. Room for further

improvement in the Labour market remains, and inflation continues to

run below our long-run objective. But with the economy performing

well, and expectation to continue to do so, a modest rise in the federal

funds rate is appropriate. It was based on falling unemployment and

inflation rising. If you keep interest rates down for too long,

the pressure will continue to build up and we will continue a pressure

in inflation. That could cause interest rates to rise more sharply

in the future. If the Fed wants to raise interest rates in a gradual

fashion, it must start sooner rather than later. Rates were kept low to

stimulate the economy, and it worked. Houses are being built once

again. The talk today is not of foreclosure, but prices potentially

getting of themselves. During the downturn, this firm had to close ten

branches and lay off thousands of workers. Now, for the first time its

turnover is back to pre-crash levels. Our employees took a big pay

cut and I went without salary for three years. But we were determined

to get through it, and we did. America's car industry also made it

through. Here in New Jersey, the talk is no longer of downsizing and

sales crashing, but of expansion and profitability. Dealerships like this

one are once again buzzing. The economy is coming back in

stabilising. That fear factor isn't there. Consequently, people are

getting what they want and enjoying life. With interest rates higher,

everything from car loans to mortgages will be a bit more

expensive. Does that make a difference to you? It does, but I

will make it work. You are always trying to find a good deal. It makes

this man's job a bit harder. As inventory manager, he must

anticipate what the customer wants before they walk in the door. The

prices can be quite different depending on features. The interest

rate change can push your price from $299, and that makes a big

difference. So, people may not pay the extra money? That's right.

People come in with a set price in mind. Even with high interest rates,

2016 is expected to be a bumpy year. The Fed 's move was widely

publicised. Many banks had already taken steps to price the increase

into some loans and saving rates. For borrowers, whether it's car

loans or home loans, it perhaps means there is not too much to fear.

But it is not much of a reason for savers to smile. And even more

reason to be unhappy for American exporters. The rush is on to fill

holiday orders. This masks a deep concern, whether America's

manufacturing revival will continue. Here, they make awards, notebooks

and other products. One third of them are sold in countries around

the world, including come at a. In Canada, we have lost around $125,000

in revenue this year. Simply because the department can no longer afford

our parts at these costs. This allows us to separate oxygen from

the air. Imagine how hard it is to sell big-ticket items. This exporter

only sells a handful of these machines each year. The sharp rise

of the US dollar in 2015, combined with the rate hike, is holding it

back. The strength of the dollar is very significant for us in terms of

our competition. It translates to anyone that was manufacturing in

Europe, would have about a 30% cost advantage. This economist doesn't

see much light at the end of the tunnel for US exporter 's. That's

where the Achilles heel of the US economy is. Manufacturing, it is the

most vulnerable area. Rates were kept low to help the millions of

Americans looking for work. But it also brought a lot of cheer to Wall

Street. It's a strange monster, for the Feds to be at zero. Along. It

means that money was free to borrow for bank to bank. -- from. Much of

that free money flowed into equity markets, making a decision to raise

rates one of the most closely watched events in year 's. The

Federal Reserve raising interest rates for the first time in nearly a

decade. It is sending Wall Street soaring. Some traders were relieved

with the certainty a rate hike delivered. It was wonderful. It

meant that everyone who has been on the sidelines, everyone who has been

cautious, everybody with big expectations, everybody who needed

some closure on this rise, it needed it to be closed. Given the bumpy

ride this year, the committee was clear. They didn't intend to take

the risk of moving too fast. Janet Yellen has made it clear her goal is

to have a long expansion. They have to allow markets to adjust. There

are always unintended consequences, because you are using tools in a

magnitude they have not been used in before. They are worried about the

unintended consequences. How will markets react? So, the error of free

money is over. To erase cheap credit without damaging the economy, rates

will continue to rise, but gradually -- era. It is a validation of the US

economy's return to some kind of strength. The challenge now for

Janet Yellen and her colleagues is to manage the risks and deliver a

complete recovery. A huge fire has engulfed part

of a luxury Dubai hotel, near where people had gathered to watch a

New Year's Eve fireworks display. The blaze started on the 20th floor,

and within minutes there was