Close panel

Close panel

Close panel

Close panel

Close panel

Home

Financials

The Share

Shareholders

Debt investors

Sustainability and Responsible Banking

Corporate Governance and Remuneration Policy

Economy Updated: 19 Jan 2016

FED: The decade of 'cheap money' is over

Last December, the US Federal Reserve (FED) announced the first increase in interest rates in that country since June 2006. Here are the keys to see what this increase for the first time in a decade means.

fed resource economy
María Ciriza
Listen to audio Leer en español

⇒What is the main reason? The Federal Reserve seeks to normalize monetary policy over the coming years.

Analysis and opinion

The ECB: What should we expect from Draghi in the second half of his tenure?

Lower interest rates on deposits, extension of the quantitative easing policy until March 2017... the measures announced in the ECB’s last meeting did not seem enough. This Thursday, ECB President Mario Draghi will chair the first meeting of a 2016 riddled with challenges, with the confidence of someone who has succeeded in dizzying situations and prevented the collapse of the single currency. His pledge in 2012 to "do whatever it takes to preserve the euro.  And believe me, it will be enough" still resounds in the collective mind of the EU. We will review now some of his most relevant decisions, and what’s yet to come.

⇒ What is its rationale for this increase? The FED believes that the decline in the unemployment rate from 10% in 2009 to 5% today positions the economy very closely to achieving the first objective of its mandate: fostering full employment. It also considers that, if current trends continue, inflation will rise from its current level of 1.3% to 2% and it will thus achieve the second objective of its mandate: price stability.

⇒What are the benefits of this measure? The Federal Reserve believes it reduces the risk of the economy overheating in the future, which would subsequently require more aggressive rate hikes. The FED also believes that there may thus be less risk in some financial markets.

⇒ What will the normalization process be like? This process will occur cautiously and gradually, allowing the FED to adequately assess the balance of risks and not jeopardize economic growth while avoiding a significant rise in inflation.

Digital Economics

Davos 2024: Rebuilding trust

Davos will be held in Switzerland from January 15th - 19th with the theme ‘Rebuilding trust’. The event organized by the World Economic Forum will bring together over 100 governments, major international organizations and around 1,000 companies, as well as civil society leaders, renowned experts, young agents of change, social entrepreneurs and the media. Davos 2024 is an opportunity to reflect on the key challenges facing the world, marked by the geopolitical tensions of recent years, but also by the trends that will define the future, such as the decarbonization of the economy and artificial intelligence.

⇒ Will there be further increases in the short or medium term? To the extent that the FED is comfortable with the cycle of rises, it is possible that the pace will accelerate. However, the FED will be cautious and will be watching the performance of financial markets and the way in which the economy absorbs the monetary normalization to react properly in case it has to be more or less gradualist.

⇒ Is this measure advantageous for people in general? For households, businesses and other countries the advantages of stronger economic growth should be higher than the negative effects of rising financing costs.