The Federal Reserve left interest rates unchanged at its April meeting Wednesday. Here’s what experts are watching now.
The Federal Reserve left interest rates unchanged at its April meeting Wednesday. Here’s what experts are watching now. David Kelly, chief global strategist at JPMorgan Asset Management, is monitoring potential asset bubbles. “I think it’s a little stickier than they think because I think you’ll see a lot of wage growth here over the next year. These labor markets are tightening very fast here, and I think that’s going to push up wages. So that’s more than just transitory, but I think the other issue here is asset prices, because we’ve seen stock prices go up 6% just since the last Fed meeting six weeks ago. And the problem is that this very low level of interest rates is really feeding asset bubbles too, and I think the Fed really needs to think about that. It shouldn’t just be about inflation of goods and services. There are other downsides to having money this easy when the economy’s doing this well.” Mona Mahajan, senior U.S. investment strategist at Allianz Global Investors, predicts higher rates and inflation expectations ahead. “Certainly what we’ve seen over the last few weeks has been the 10-year Treasury, for example, came from 1.75% down back to 1.55%. We’re starting to see that grind back higher. I do think that trend could continue especially as we get the announcement of additional stimulus, the reopening of the economy in really true form this summer months, and then of course, the Fed if it does commit to remaining on the sidelines for the quarters or in the foreseeable future in the next one to two quarters, that really is a good backdrop for inflationary expectations to rise and for rates to start to rise again.
