The Federal Reserve announced on Wednesday, December 16th, that it would raise policy interest rates by ¼ to ½ of 1 percent. It will end the seven year policy of keeping Fed interest rates near zero.
This change in a monetary strategy had long been pushed by Wall Street. Fed decision will not influence positevely real economy but it will increase profitability of commercial banks.
The link between monetary policy and bank profitability is an under-researched area. In its report published in October, 2015 economists of Bank of International Settlement noticed that due to the number of reasons the net benefits of a monetary accomodation, for a financial sector, might have declined.
(…) One such side effect is the negative effect of a low interest rate structure on bank profitability.”
Increasing amount of academic studies confirm that the outsized financial system, relative to the real economy, is negative for growth. Nevertheless Fed once again decided to improve ‘ profitability of financial and banking sector at the expense of real economy.