Fed rate raises have a global boomerang effect

In June of 2018, the Fed announced an increase in the interest rates charged by the central bank. It’s obvious that rate increases will affect the US ecomony; what’s less obvious is that there’s a global mechanism that compounds that effect.

The majority of the world’s financial trades are conducted in US dollars, regardless of the country where the trade actually occurred. With the cost of acquiring access to US dollars increasing around the globe, trading is then more expensive, increasing costs in other currencies, which then feeds back into even greater increases in the costs of business for the US.

This feedback loop, while not a certainty, has been observed many times during previous rate increases.

Read the full, original article, Rate rises affect global markets—and may feed back to America.

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