Don’t fight the Fed, maar hoe?

Ron Markus
Monday, 19 April 2021
Ron Markus

The Fed is aiming for structurally higher inflation. Considering the strong growth expectations, this means US long-term rates are way below nominal growth and have ample room to rise further. At the same time, the Fed insists on keeping the policy rate near zero for at least the coming quarters, incentivising investors to borrow short and invest in higher yielding long term debt, which means downward pressure on long-term interest rates. What does this mean for the outlook for long-term interest rates?

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