While the market is rife with speculation that the Federal Reserve will raise interest rates earlier than expected after last week's strong jobs report, many financial experts believe short- and long-term rates will stay low for a long time.
That's because they don't think economic growth and inflation are strong enough to boost rates much.
"People who are looking for higher inflation and higher interest rates are fighting the last war," Robert Tipp, chief investment strategist for fixed income at Prudential, told the
Los Angeles Times.
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The economy shrank 2.9 percent in the first quarter. And while most analysts expect a strong rebound for the rest of this year, the economy hasn't been able to sustain growth of more than about 2 percent since the Great Recession ended in 2009.
The Fed has kept its federal funds target rate at a record low of zero to 0.25 percent since December 2008. Some economists now expect the Fed to begin raising that rate in the first half of next year.
But, "if they see any sign of an [economic] slowdown, they'll stop," Tipp noted.
Inflation appears to be slowly picking up steam, but some don't see the rise in the consumer price index and the personal consumption expenditures as a red flag.
"To see a pickup in inflation you have to see it in wages. It just isn't there," Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch in New York, told the Times.
And some bond market participants remain unconvinced about the economy's strength.
"Even though data has been looking a little better, the jury is still out on if it will lead to momentum in the second half," George Goncalves, head of interest-rate strategy at Nomura Holdings, told
Bloomberg.
"The back end [of the yield curve] is a comfortable place for investors to be."
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