Back to normal

It can not be excluded that the mere fact that the Fed is taking the step after seven years of near zero interest rate is positive. To overcome the crisis, which in its early phases threatened to melt Wall Street, as lending froze and swept the major banks, the central bank not only use all the levers, but was forced to invent new ones. The use of strange acronyms for the purchase of securities from the market with trillions and uploading them to balance the Fed was accompanied by criticism that opens Pandora’s box and that you should take the time from which nobody knows how to come back.

So far in his first steps backward-led by Janet Yellen Federal Reserve gave no appearance to stumble. Institution slowly and methodically shut its printing money, and now passed and the next phase. Now logical concerns are how the process will continue to be managed smoothly. Traditionally, the Fed target interest rate achieved through open market operations – purchases or sales of debt against the dollar, which increases or reduces liquidity. In excess liquidity in the system, however, this tool becomes difficult usable. That’s why the Fed got with others like reverse repo transactions – figuratively speaking, the central bank borrows cash from banks and in return gives them of their securities on its balance sheet. Only on Thursday thus the central bank mopped 105 billion. Dollars from the market and signaled that these operations are limited only by the available balance in her about 2 trillion. dollar US government debt.

And if soft start is considered optimistic by markets in the background remain concerns. Pour dollars in recent years the markets (and pouring billions of euros by the ECB) are not turned into inflation and logically raise the question whether they are different inflate new bubbles, which at tightening could be without air. Where and how no one can say with precision, but one concern is that the appreciation of dollar funding will further hit on external capital flows to emerging markets. And they already are not in good shape – the recession is already a reality in Russia and Brazil, China lowered its growth target. If the transmission is activated and expectations for more interest rate hikes 3-4 Fed next year materialize, there is a risk companies and banks in the developing world remain dry. In 2015 already, the net outflow of capital there is estimated to be 0.5 trillion. dollar and strengthening of the dollar this process can escalate. Emerging economies themselves can not react with interest rate hikes because it would shrank further growth, and this will force them to burn their currency reserves. And if the negatives are realized in the world economy, they will inevitably boomerang in the US.