Kemmer: Fed interest rate turnaround good news – crisis mode no permanent state of affairs
“The US Federal Reserve’s interest rate hike is good news: it shows that the Fed trusts the economic upturn in the US and sees the consequences of the financial crisis as having been largely overcome,” said Michael Kemmer, the Association of German Banks’ general manager, today. Extremely expansionary monetary policy shouldn’t become normality for the European Central Bank (ECB) either. Mr Kemmer: “Once the economy and the financial system are sufficiently stabilised, it’s clear that – like in the US now – the glut of money has to be gradually curbed.”
Mr Kemmer was confident that the Fed would set the further course of adjustment in its monetary policy cautiously and circumspectly: “The Fed has carefully prepared market participants for this interest rate move”. Lately, any decision by the Fed to hold off on a rate hike again would have come as more of a surprise and harboured the risk of market turmoil. Yet it shouldn’t be overlooked that US monetary policy still remained highly expansionary. “And this isn’t going to change much in 2016 even if the Fed continues to raise interest rates in three or four small steps next year,” Mr Kemmer said.
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