The Fed's day of reckoning arrives

The eyes of the financial world are firmly focused on Washington

The Fed's day of reckoning arrives

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In what has been heralded as one of the most anticipated Central Bank decisions in history, the US Federal Reserve will today announce whether US interest rates are to rise for the first time since 2006.

It is expected that there will be a 0.25% increase from the current near zero levels, and that rates will probably be raised by an additional 1% over the next year in increments.

This is in-line with the bank's longterm goals of creating an environment to generate employment and to meet the 2% inflation target.

The move is likely to calm equity markets in the short term as markets hate uncertainty and plunged in September when the Fed last deferred this decision.

It’s also likely to strengthen the dollar over time with most analysts expecting parity with the euro as early as the second quarter of 2016.

Markets rallied and oil prices lifted yesterday ahead of the decision - the ISEQ closed up 66 points at 6,656.

A rate hike is likely to create problems in emerging markets where governments and businesses are dependent on borrowings made in US dollars.