Markets celebrate the end of uncertainty
The rally is in some ways a vindication of the Fed's policy manoeuvres since the financial crisis
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IF THE outbreak of World War II traditionally closes the chapter on the Great Depression in economic history books, the Federal Reserve's policy move on Wednesday will likely end the chapter on the Great Recession.
Chairwoman Janet Yellen's Fed raised interest rates for the first time since 2006, drawing a line under the half decade of central bank intervention marshalled by her predecessor Ben Bernanke to avert another depression. Mr Bernanke slashed the Fed funds rate at which banks borrow from the central bank to zero in 2008 and there they remained until just after 2 pm Eastern on Wednesday.
The hike was a cathartic moment for the US stock market. Trepidation about the Fed's hike plans had caused periodic plunges in stocks ever since the "tapering" of bond purchases was first mentioned in 2013. When the bogeyman finally emerged, however, stocks rallied. Why were stock bulls celebrating the event that was one of their greatest fears?
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