IHS Global Chief Economist Nariman Behravesh talks about the Fed's decision to raise rates for the first time in nine years, and what's next. Bobbi Rebell reports.
The Fed raising interest rates by a quarter of a point the first hike since June of 2006 let's get some contacts from Aaron that Barack met. He's chief global economist that I kestre taxis there. Q Arie your reaction you weren't surprised that the move but was that the right move. All I don't think it was the wrong move I mean we can debate about. Whether or not they should have raised rates the problem of course is well let's say based on economic fundamentals. It was a 5050 proposition namely. Growth is solid but inflation is not a problem so they kind of waited longer a problem though is that they. They had set a pre announced this hike. Everybody talked about it everybody giving speeches on it that is to say the Fed officials. So it's almost like if they didn't do with them and lose credibility. I think they wanna get us out of the way. And then from now on I think they're gonna proceed very carefully very slowly yet lost I think that's what we're going. Right in this statement is pretty data and she Nathalie said in her speech but but answer several questions about. The timing of it and really kind of defended it talking about not wanting to get behind markets right. I think that's right it's you know there. In the past the pet the Fed has been criticized her for getting behind the curve for. For reacting too late and at some point doing too much too late. And the Fed doesn't want to repeat that mistake I'm talking here about the eighties and nineties and so forth and and so in that sense that they want us to get ahead of things. But again that if they hadn't done something. This time if that raise rates they were really would've lost credibility because as it is they postponed the decision from September to December. And the markets weren't happy about that at the time. But so now the markets yes seemed fairly sanguine expected if they got it so let's like let's move on. Says India moving not where we go from here. Well certainly the expectation. Of the Fed officials they governors of the Federal Reserve and the district bank presidency is that. But they'll be form more hikes so that by the end. 2016. We're going to be around. One point 4% something like that on the federal funds rate. And then base again on the expectations for 2007 team. For more hikes. So there were up around 2.4 percent by the end 2017 that. Putting that in context. 2006. Worth five and a quarter percent so we'll still be at the at the end of 2017. Well below where we're at 2006. Are so what does this mean for the economy at this point what does this do. I think these are small increases. And the good news is the US economy is a pretty solid ground. Growth is and that two and a half to 3% range pretty much in terms of underlying growth rate. So these kinds of increases in interest rates are fairly small and we don't think will be terribly damaging. So you know from that perspective we do not expect the Fed to get in the way of this expansion. And just finally the Fed's communication we have lots of different opinions throughout the fall. In this case there were there was no dissenters is that's significant and if so why. Well I think it is significant I think if bad. For a while faltered in terms of its communication but more recently. That and more unified and I think this statement. As he indicated earlier was slightly damaged I think that was explicitly. To bring everybody on board that had some. Doubts and questions about whether this this is the right time to raise rates so I think they they went out of their way to get everybody in under the tent so to speak. And I think the dovish wording was what yet. Aric thank you so much there. I think in our man there matchup I tests I've got your pelvis and Reuters.