Last week (December 16, 2015), the US Federal Reserve Bank raised its policy interest rate by 25 basis points (1/4 percentage point) for the first time since 2005. In its – Opening Statement – the Federal Reserve chairperson said that the decision reflected the Bank’s judgement that there had been “further improvement toward our objective of maximum employment” and that it “was recently confident that inflation would move back to its 2 per cent objective over the medium term”. They did, however, acknowledge that “some cyclical weakness likely remains” and referred to the significant drop in labour force participation, the rise in underemployment, and the almost non-existent wages growth. Taken together, it was a strange decision to take given that the labour market is still a long way from where it was pre-crisis (unemployment has been replaced by underemployment and non-participation) and that the price level inflation is well below their two per cent target (even taking into account the extraordinary drop in energy prices).