raise rates?? The Fed just announced that it will keep the fed funds rate at 0%. Reasons amount to low inflation, people not working who could which makes the employment picture worse than it seems if one looks at just the unemployment rate, and world economic conditions that could infect the US. Rates have remained very low since the 2008/9 crisis.
At this point, rate debates have become destabilizing, and somewhat damaging. We now have another several weeks to wait to see if we’re going to have a rate hike, which means another several weeks of potential volatility. Importantly, the bond market has already moved up in yield in the short end of the curve, despite the rally today. At this rate, the market is going to tighten ahead of the Fed, which happens pretty frequently unfortunately.
On the other hand, not many interest rate increases around the world have ‘stuck’, as central bankers have had to backtrack in a few cases.
We reiterate that low rates are here to stay for a long time to come, though the shape of the yield curve is a wild card. Short rates could and probably should move off the fractions they now trade at, and long rates may move up past or down below the 3%-ish number that has prevailed lately, but big moves are not likely for years to come. Factors such as slack labor markets worldwide, demographic changes, and historic debt accumulation will keep a lid on rates for some time, in our opinion.