Fed May Cause Wobbly Global Economy to Tip Over

MILAN â?? The US Federal Reserve has finally, after almost a decade of steadfast adherence to very low interest rates, hiked its federal funds rate â?? the rate from which all other interest rates in the economy take their cue â?? by 25 basis points. That brings the new rate up to a still-minimal 0.5%, and Fed Chair Janet Yellen has wisely promised that any future increases will be gradual. Given the state of the US economy â?? real growth of 2%, a tightening labor market, and little evidence of inflation rising toward the Fedâ??s 2% target â?? I view the rate rise as a reasonable and cautious first step toward normality (defined as a better balance between borrowers and lenders).