Welcome to First State Investments’ yield report, exploring the potential implications of interest rate increases for seven asset classes across our portfolio of investment capabilities.

Welcome to First State Investments’ yield report, exploring the potential implications of interest rate increases for seven asset classes across our portfolio of investment capabilities. 

The background surrounding the historically low interest rates is well known. It was more than six years ago, in an attempt to stimulate the US economy, the Federal Reserve (the Fed) reduced its benchmark interest rate down close to zero, but that policy is now expected to change.

A potential rise in US interest rates has been one of the most discussed topics in recent months. With the US unemployment rate expected to drop towards 5% or lower in coming months, inflation expected to trend higher in the year ahead and the economy expected to grow by 2.5%-3.0%, the question is becoming not “will the Fed increase interest rates?”, rather a question of “when will the Fed increase rates and by how much?”

Fed policy makers last met on July 28-29. Since then, the global economy has added an extra layer of risk to the Fed’s timing. The slowing of the Chinese economy, the slumping price of oil, jarring downturns in global stock markets and a lower-than-expected jobs figure in August have all prompted questions over whether this is the best time for the Fed to begin raising rates. What better time to delve into the key drivers of interest rate decisions and examine how this might affect portfolios and asset classes. Please get in touch with your FSI contact with any questions or feedback.

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