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Updated 02:16 22/09/20

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A Fed rate rise will cause panic and turmoil

Duncan Richardson, News Editor
9 Sep 2015, 11:44 a.m.

Chief economist at the World Bank, Kaushik Basu, believes there will be mass panic and turmoil if the Fed raises rates.

The global economy is looking weak and if the Fed does raise interest rates it will send shockwaves across the financial system and cause immediate problems within the world economy.

Following last month’s weak U.S. employment data a decision on whether the Fed will increase interest rates is now too close to call.

An interest rate hike could potentially threaten emerging economies, many which have their debt denominated in the U.S dollar. Firstly they would have to pay a higher rate of interest on their debt and secondly the value of debt would fall.

In 2013 when former Fed chairman Ben Bernanke moved to end the Feds quantitative easing program the dollar strengthened and caused volatility in the international debt and foreign exchange markets. Once again the fate of the world economy rests with a bunch of unelected officials.

The Fed will announce their decision on the 17th of September.

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