After six years of a zero-interest-rate-policy (ZIRP), U.S. interest rates are set to go up. But that does not mean a straight shot up. The Fed has not been in a hurry and with inflation low, can manage the next stage of interest rate management.
The Fed has not followed through on their numerous promises of a rate increase that Fed Chair Janet Yellen and other Fed officials have made over the past several years. She spoke about purchasing assets of private companies and also mentioned that the Fed could modify its inflation target.
The pendulum of market sentiment swings from one extreme to another, and over the past several weeks, traders’ outlook on Fed policy has swung violently back toward the doves.
Zero interest rate policy scorches the planner and the saver, rotting the seed corn while providing fuel for speculation, breeding the trading culture pestilence we see today. Yet again, another tiresome cycle appears. More bubbles to end all bubbles.