Goodbye cheap money, hello frugality
The US Federal Reserve chief has announced an interest rate hike of 25 basis points. For the longest time, the market had speculated on when this would take place. In fact, the speculation had taken a life of its own and we retail investors had no inkling who to believe any more.
As expected, the market will always have something to say. Was the hike too little, too late? Too much, too soon? Was it sound against a still-wobbly economy? Looking into the future, how gradually will this increase take place?
Meanwhile, the markets’ response seems relatively muted. If the long-drawn-out process had served any purpose, it would have been in the stability it brought to prices. Long before Janet Yellen announced the rate increase, the markets had already priced it in.
So, what’s next? Against weak oil prices and a commodities overhang, there is not an engine that will pull the world economy out of the doldrums. China is limping along with growth below 7 per cent. Europe is coming back but not fast enough. Japan is technically in a recession. The United States looks promising for now, but with a presidential election looming in 2016, anything can happen.
The Association of Southeast Asian Nations, which is launching an economic community just as 2015 ends, looks promising. With a combined market of 600 million people and an eagerness to develop economically, the region is positioned to take off in a big way. Of course, integration will take time but, with a shared resolve, it offers the best chance yet in matching the European Union as a bastion of a regional bloc.
The only blot is regional geopolitical concerns. Against an uncertain global economic climate, this new economic community is synonymous with self-help to get us all out of the rut.
