Vanguard, said that central banks' efforts to fight inflation are not even close.
This means that the market may still be vulnerable to more shocks, such as the British Treasury crisis that broke out in September, forcing the Bank of England to take action to calm the market. "Interest rates have risen rapidly in the past six months, and this rate is expected to continue. Our view is that the policy rates of these major economies will continue to rise until March 2023."
's expectations for the direction of the Fed's policy rate rose sharply in October (see chart), and based on the one-month forward swap interest rate, the Fed's policy rate may break through 5% from the current target range of 3%-3.25% in 2023.
BoE’s policy rate is expected to reach nearly 6% in 2023, while the ECB’s interest rate is expected to remain below 4%. These interest rates will be much higher than the existing policy rates and the "neutral interest rate" of around 2%. Neutral interest rates are expected to neither stimulate nor limit major economies.
Dow Jones Market Data shows that the benchmark 10-year U.S. Treasury bond rate has been approaching 4% on Monday, close to its highest level since 2008. The dollar's weekly rise in the past 11 weeks has put pressure on U.S. stock markets and has made it increasingly expensive for consumers to borrow from big companies.
Although interest rates are ultimately determined by "future events and data", Vanguard's Saleheen also said she expects central banks to stick to plans to fight inflation with interest rates unless "an unexpected happens" or market threats erupt, "out of the slowdown they are trying to control."
This article comes from the financial industry
