US bond yields have remained stubbornly low, flying in the face of key indicators such as rising inflation and employment. The US isn’t the only country with low bond yields, and many credit lingering pandemic uncertainties. Failing a robust, sustained recovery in confidence and economic performance, they may continue to languish.
The pandemic threw cold water on the inflation rate in the US, but the price level is beginning to heat up. The country is bursting at the seams with pent-up consumer demand, but much will depend on the rate-setting actions taken by the Federal Reserve. How hot will the central bank let it get before raising rates to turn down the heat?
The COVID-19 pandemic halted the United States’ record-setting employment streak, causing the world’s foremost economy to shed nearly 10 million jobs in 2020. With warmer weather, vaccine rollouts and federal stimulus on the immediate horizon, employment numbers are picking up steam faster than expected, causing optimism to seep into financial markets. But the US has a long road to traverse before recouping all of its lost jobs and gaining more.
The Federal Reserve System’s Board of Governors (the Fed) in the United States concluded its two-day monetary-policy meeting on Wednesday, September 16, announcing that interest rates will remain unchanged at near-zero (0-0.25 percent), another decidedly dovish signal that its monetary policy will effectively be on hold for the next few years.
Relations are growing frostier globally, as political leaders become more nationalistic. And this change in climate is impacting economies, rendering them less cooperative. Two significant changes affecting the global business cycle include the US Fed’s tighter monetary policy, the impacts of which have rippled throughout the world, as well as the geographical shift of the centre of manufacturing production to the East, to the dismay of some Western leaders.