Last December, policymakers at US Federal Reserve forecasted three rate hikes in 2017, however, the financial markets was in no mood to price them seriously, as in the past, two years prior to 2016 Fed didn’t hike rates as promised. However, as the most of the policymakers kept on making comments on a path of faster rate hikes, the markets have started pricing three rate hikes in 2017, which first one beginning next week in March. If the inflation keeps up, it is looking increasingly likely that the Fed would deliver on its promise.

Many have speculated in the past that what it means for the stock markets, real estate or even the real economy for the Fed to hike rates faster. We at FxWirePro believe that these would be of lesser concern in 2017 even with three rate hikes if the fiscal authority under the newly elected government delivers on its fiscal promise. That is why the stock markets in the United States remained resilient despite the pricing.

Instead, the increased interest rates from the fed would be of major concerns for economies that use a fixed exchange rate regime against the dollar. To protect their peg to the US dollar, these economies move their interest rates in line with the FOMC. The following economies could suffer the most from higher interest rates in the US,

• The oil group: Several countries in the Middle East that rely largely on oil exports could suffer big time, especially Saudi Arabia and the United Arab Emirates. Saudi Economy would be forced to increase rates at a time when the banks are already suffering a very high level of non-performing assets.
• Another one, which might suffer from higher interest rates, is Hong Kong, the jewel of China. The risk it suffers is an increased rate at a time when the economy has already been suffering from a slowdown in the Chinese economic activity, its biggest trading partners.