The U.S. Federal Reserve Board last week decided to raise short-term interest rates. The move was widely expected in the wake of Donald Trump's election as the next U.S. president given his plans for tax cuts and infrastructure spending to boost the economy and their tendency to spur inflation. But a strong American economy will exacerbate structural imbalances in the global economy as the value of the dollar climbs and other economies battle capital flight. In particular, there are real concerns about China's prospects and growing tension in the U.S.-China relationship.

The Fed has kept short-term interest rates steady and low since the 2007-08 global financial crisis, raising them only twice during that time. The Fed, like other central banks, kept interest rates low — nearly zero — to provide liquidity to markets, to stimulate demand, and to ensure that prices did not collapse. As the U.S. economy recovered and began to expand and unemployment dropped below 5 percent, there has been a renewed focus on inflationary pressures.

Forecasting expected U.S. growth of around 2 percent for the next three years — compared with 2.4 percent in 2015 — the Fed wants to both be ready for inflation (if growth exceeds 2 percent) and if growth slows (expansion slows to below 1.5 percent). The Fed anticipates raising interest rates three more times next year — in September, it forecast two increases — suggesting that it expects the Trump administration to stimulate the economy.