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Fed rate rise is first step to rebalance US financial system 

December 22, 2015

Gillian Tett, Financial Times

All eyes are focused on the US Federal Reserve. By announcing a 25 basis point rate rise, Janet Yellen, Fed chair, has started weaning the American economy from its addiction to cheap money. Given the recent mixed economic data, economists are divided about the merits of this decision.

For a different perspective on the challenge facing the Fed, it is worth looking at another corner of Washington: the Office of Financial Research. Just before the Fed announcement, the OFR published its first Financial Stability Report on the health of US finance.

This went largely unnoticed because most voters do not have the faintest idea what the OFR actually does.

That is a pity. The OFR was set up after the 2008 crisis as an offshoot of the Treasury to assess financial risk, and its report reveals that several years of ultra-low rates have created a distinctly distorted American financial system. Read more

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