09/18/2015, 00.00
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“Hightened concerns" about growth in China among the reasons for the Fed zero rate

by Paul Wang
For Janet Allen, head of the Fed, China and emerging markets have uncertain outlooks. The Shanghai stock market recovered slightly despite a bad week. Skepticism about China, the US and world economy.

Hong Kong (AsiaNews/Agencies) - The US Federal Reserve has decided not to revise the interest rate of the dollar, letting it fluctuate between 0 and 0, 25%. The rate has remained at zero since 2008, at the outbreak of the present economic crisis.

The Fed also gave the reasons for this freeze. Janet Yellen, the Fed chairman, said yesterday that "the outlook abroad appears to have become more uncertain of late. And heightened concerns about growth in China and other emerging markets economies have led to notable volatility in financial markets."

Until two months ago, many analysts thought the Fed would raise rates. But China's decision to devalue the yuan and the ups and downs of the Shanghai Stock Exchange have raised fears that the economy of the dragon is weakening more than the authorities confess. The devaluation of the yuan is likely to result in a series of devaluations in Asian countries and more difficulties in payments in dollars of imports, coming thus to curb US exports and the weak recovery of the US economy.

The last time the US central bank actually raised rates was June, 2006. Yesterday’s decision extends an era of extraordinary monetary policy accommodation – which started with the subprime crisis -  during which the US central bank cut interest rates as low as possible and flooded the banking system with about US.6 trillion in cash through a series of asset-purchase programs.

No word yet on how the Fed's decision will affect the world economy. Today, the Shanghai stock market has shown little signs of recovery (+ 0.38%), in a negative week (- 3.22%). Same for Shenzhen (+ 1.25% today), with a - 5.71 on the week.

For some analysts, the Fed's decision will not change anything especially against a possible financial bubble in China. For others, continuing to keep a zero rate is a sign that the world situation, not only the Chinese and the US, is worrying.

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