This site uses cookies: Find out more.
If the US Federal Reserve wants to meet its target inflation rate, it will have to ensure there is no “slack” remaining in the economy. The unemployment rate is still falling and that would indicate to me, there remains more slack in the US economy. Besides, if the Fed were merely waiting for it to be satisfied with job creation before raising rates, then it would have raised rates by now. However, normalisation of interest rates looms and the “new normal” will be quite different to the old normal. The crisis may be over and the US economy resuscitated, but it is permanently in a different place until such time as we see a fiscal response to address structural needs. An interest rate rise should not be feared. Rising interest rates can be the harbinger of a growing economy; an economy restored to its health. Economic expansion underpins corporate earnings growth, which is one of the most important drivers of longterm stock returns. The temporary selloff in equities when a rate rise cycle starts, has often proven to be a buying opportunity, as subsequent equity market performance has been generally positive