Is the Fed hike the silver bullet that can bring economic prosperity back?

On expected lines, the US Federal Reserve has hiked interest rate for the first time in a decade. Economists are hammering out on how will hike of a quarter of a percentage ensure an economic revival.

US Fed Chair Janet Yellen says a modest rise in interest rate is appropriate when the US economy is performing well. But economists say whether it's hawkish or dovish tightening, the question is not it a rising tax on consumer income that argues against raising rates. Some market analysts fear that it will result in more funds withdrawal from emerging markets.

The US Federal Reserve believes inflation will go up as soon as oil price fall is arrested. The US central bank also considers inflation is actually progressing to higher levels.

After the US Federal Reserve has decided to hike interest rate by about 0.25 percent, Forbes published a report on whether it'll bring normal economy back.

The report calls out Yellen's belief in  the correlation between inflation rise and oil price drop as an obvious mechanistic mathematical result. Forbes' question is that really a rise in inflation. If wage growth is not increasing then it's a rising tax on consumer income that argues against raising rates?

After the US Fed's increased the interest rate, the Wall Street rose as Dow Jones Industrial average surged 1.28 percent to 17,749 points. US Fed Chair Janet Yellen said: "The underlying health of the US economy, I consider to be quite sound."

The Fed decision means for normal households the rise in the cost of mortgages, auto loans and outstanding amount on credit cards.

The US officials are confident that by raising the interest rate, the American economy will come back to normal level. This further holds support to the campaign by the US Federal Reserve. This is nothing but, indirectly, getting the nation off cheap credit without disturbing the recovery process, as reported by The Washington Post.

The US Federal Reserve is aiming at policy rates back to normal so that it can raise the funds rate in 2016. So that it equals the inflation rate by end of 2016 and pull rates modestly ahead of inflation in next year by end of 2017. So that it can ensure a real rate of 1.5 percent by 2018. Economists term this strategy as the sweet, uncomplicated world of model based outcomes.

According to a report by The Wall Street Journal (WSJ), though it'll be a short relief rally for markets now, the underlying risks to emerging markets may worsen in the future. Emerging economies and corporate firms are still struggling from high debt cost amid slowdown of economic activity.

It is estimated that a net of $30.5 billion pulled out from stocks, bonds and funds in Asian emerging markets in November alone. This was the largest withdrawal from emerging markets since global financial crisis in 2008. 

Economists further hold the view that the economy, as Janet Yellen believes, is going progress but, not smoothly. Some economists strongly doubt that it'll mean equally spaced hikes. It is certainly not the intention of the Committee to follow any mechanical formula.