Already a subscriber?Financial markets and the US Federal Reserve remain in disagreement on a subject crucial to asset prices and economic growth: how low interest rates will eventually go.
Futures indicate that short-term interest rates will bottom out at about 3.75 per cent in 2027, while the median forecast among members of the policymaking Federal Open Market Committee is 2.6 per cent — more than 100 basis points lower.. This makes sense because the target is asymmetric: The central bank is committed to offsetting downside misses with comparable misses to the upside, but not the other way around.
Declining savings push in the same direction: The federal government is running vast budget deficits, while soaring asset prices have boosted household wealth, leading the personal savings rate to decline to 3.6 per cent of disposable income, from an average of 5.7 per cent in the decade following the 2008 financial crisis.
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