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US interest rates may rise after Fed ends QE

A rise in US interest rates came a step closer after Federal Reserve boss Janet Yellen tonight decided the US economy is healthy enough for it to call an end to quantitative easing.

Unemployment is below 6% for the first time in six years, and US economic growth has averaged 2.3% since 2009.

Growth of around about 2-3% equates to between $500 billion and $600 billion of additional production of goods and services.

Markets had been on tenterhooks awaiting a decision and it is bound to impact when London opens tomorrow.

The QE programme has cost the Fed $15 billion a month and swollen its balance sheet to $4.45 trillion including $3.5 trillion of government bonds and debt.

There are those who believe the QE programme will sow the seeds of the next crash by artificially stimulating markets.

However, AMP Capital’s Shane Oliver says it has been a force for good. “If the Fed didn’t do QE, you potentially would have had 20, 25% unemployment, which would have made life very tough for the average American worker,” he told ABC News.

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