Whether or not San Francisco Fed President John Williams is right about US inflation and employment being about as close to the central bank’s targets as investors have seen – as he told CNBC two days ago – is irrelevant: The central bank is going to raise interest rates two more times this year no matter what happens to consumer prices, says Credit Suisse Chief Investment Officer for Switzerland Burkhard Varnholt. That’s because it’s pointless waiting around for prices to rise when the real reason inflation is low – and will likely remain low – has nothing to do with the Fed, but with a structural shift in the US economy that’s being driven by technology giants like Amazon and Uber. Burkdard says these companies
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Whether or not San Francisco Fed President John Williams is right about US inflation and employment being about as close to the central bank’s targets as investors have seen – as he told CNBC two days ago – is irrelevant: The central bank is going to raise interest rates two more times this year no matter what happens to consumer prices, says Credit Suisse Chief Investment Officer for Switzerland Burkhard Varnholt.
That’s because it’s pointless waiting around for prices to rise when the real reason inflation is low – and will likely remain low – has nothing to do with the Fed, but with a structural shift in the US economy that’s being driven by technology giants like Amazon and Uber. Burkdard says these companies have “turned most companies and sectors into price takers rather than price makers.” |
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When asked if there’s anything about the market that investors might be ignoring, Burkhart replied that investors might be underestimating demand for bonds in the coming years – especially at the long end of the curve.
Williams, who isn’t a voting member of the Fed’s interest-rate setting committee this year, has stuck to the Fed party line of calling for three rate hikes this year despite core consumer prices rising just 1.9% in April, the slowest pace in 19 months, while the labor force participation rate remains near multidecade lows. |
Tags: Business,Capital Markets,Consumer Prices,Credit Suisse,Deflation,economy,Featured,Federal Reserve,inflation,Interest Rate,John Williams,Macroeconomic policy,Macroeconomics,Monetary economics,Monetary inflation,Monetary Policy,money,newslettersent,San Francisco Fed,Sharing economy,Switzerland,Uber,US Federal Reserve