Market Overview Analysis by Lance Roberts covering: United States 10-Year. Read Lance Roberts's latest article on Investing.com
Recently, James Grant, editor of the Interest Rate Observer, was asked about his outlook for interest rates.
Let me state that I have a tremendous amount of respect for Grant and his work. However, I can’t entirely agree with his view. I will focus today’s discussion on the outlook for interest rates based on the two bolded sentences above. France, England, Russia, Germany, Poland, Japan, and others were devastated, with little ability to produce for themselves. America found its most substantial economic growth as theBut that was just the start of it.
Grant further suggests that interest rates will be higher due to increased debt and deficits. Unfortunately, there is no evidence supporting that hypothesis.As shown below, the 10-year economic growth average correlates with interest rates. When economic growth rises, lenders can charge higher interest rates.
Like today, the Fed was hiking rates to quell inflationary pressures from exogenous factors. In the late 70s, the oil crisis led to inflationary pressures as oil prices fed through a manufacturing-intensive economy. Today, inflation resulted from monetary interventions that created demand against a supply-constrained economy.the economy was primarily manufacturing-based, providing a high multiplier effect on economic growth.
Higher interest rates will increase borrowing costs, which leads to lower profit margins for corporations. Given the current push by Central Banks globally to suppress interest rates to keep nascent economic growth going, an eventual zero-yield on U.S. debt is not unrealistic.
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