[eli5] Why is US federal interest rate highly important in the financial world?
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A lot of smaller countries debt is denominated in dollars. If the US interest rate goes up it makes the Dollar more valuable and scarce created a Dollar shortage. This makes repayments and re-financing of debt more expensive for smaller countries as their own currency usually is losing value compared to the Dollar. Argentina is a current example of this. Most US companies and corporations carry huge levels of debt and mange this through loans and corporate bonds. This debt becomes difficult to manage when interest rates rise i.e newly issued corporate bonds have to compete with the yield on government bonds. Another example is approximately $1.5 trillion of US commercial real estate debt needs to be refinanced in the next two years where the initial loans would be almost zero they may need to be refinanced at 6%+. A high US interest rate has lots of knock on affects globally.
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