What is the US Federal Reserve playing at?

Yesterday's announcement of an increase in the US Federal Reserve's emergency rate to 0.75% has prompted a number of discussions within the US and worldwide financial sector. The emergency rate is simply the rate that US banks are charged to borrow money off the Federal Reserve, and while it has no immediate impact upon the Fed Funds Rate (which is effectively the US version of UK base rates), it has prompted speculation that US base rates could rise in the short term.

US base rates have been around the 0% level for some time now with the authorities keen to increase lending capacity within the economy in order to try and pull the country out of the recession. Thankfully, the Federal Reserve has today confirmed it is unlikely that US base rates will rise significantly in the short to medium term with speculation they will remain at near 0% for some time to come. The US economy has improved over the last few months but in line with the likes of the UK, the Eurozone and the general worldwide economy the performance of the economy has started to falter of late.

In simple terms, where the US leads the rest will follow with all eyes now on US base rates in the short to medium term.