Kuwait-Mubasher: A decision by the U.S. Federal Reserve Bank (FRB) to increase the interest rate is confidently predicted to take place in less than half a year, Al Shall Consulting said, citing the FRB’s earlier move when it kept the interest rates low until the mid-2004 as the mistake which paved the way for the global financial crisis in 2008.

Following the 2008 global financial crisis, the US Federal Reserve, in line with the US dollar being the global reserve currency, tried to link raising the interest rate with a low unemployment rate, that was 6.5%, when the unemployment rate then was close to 10%, said a report issued by Al Shall Consulting.

Later in 2012, the Federal Reserve identified a goal for inflation at about 2% which seems appropriate to stimulate economy.

Al Shall report noted that forecasts were almost unanimous that the FRB meeting on September 17 would result in a decision to start lifting interest rates. However, the events unfolded in August, including the Greek crisis and the fall of the Chinese stock market, have lowered such prospects for an increase in interest.

The FRB meeting, the week before last, maintained the interest rate fixed close to zero; not because of August events, but due to special justifications pertinent to the American economy and its projections of weak global economy growth.

This occurred despite an excellent growth rate in the second quarter at 3.7% and despite lower unemployment rate that is better than most of the advanced economies at 5.1% in August, yet, the goal of inflation remained remote at about 0.2% only in August, added Al Shall. 

Edited by Pavly A. Makary