{"id":113274,"date":"2021-02-17T23:49:16","date_gmt":"2021-02-17T23:49:16","guid":{"rendered":"https:\/\/precoinnews.com\/?p=113274"},"modified":"2021-02-17T23:49:16","modified_gmt":"2021-02-17T23:49:16","slug":"interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/","title":{"rendered":"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say"},"content":{"rendered":"<ul>\n<li>Interest rates are rising because of expectations for better economic growth, and they should continue to move up but moderately.<\/li>\n<li>Inflation is a fear in the market, but strategists do not yet see it as a main catalyst for interest rates.<\/li>\n<li>The 10-year Treasury yield, which impacts mortgages and other loans, rose to 1.33% early Wednesday morning and could go as high as 1.5% in the near term.<\/li>\n<\/ul>\n<p>Interest rates are expected to continue their upward march, but for now they&#x27;re not expected to get high enough to harpoon the stock market.<\/p>\n<p>Treasury yields have been rising quickly in the last week, and the benchmark 10-year yield has been on a tear \u2013 reaching 1.33% in the early morning hours Wednesday before retreating below 1.30%. <\/p>\n<p>Yields move opposite price, and the 10-year has risen from about 1.15% just a week ago to levels that are close to where they were when the pandemic started hitting the economy last February.<\/p>\n<p>The 10-year is key to the economy, since it impacts mortgages and other consumer and business loans.<\/p>\n<p>Bond strategists say the move in yields has opened the door for a higher move, and a next logical target for the 10-year is 1.5%. The yield is unlikely to go much higher in the near term unless inflation picks up or there is a signal from the Fed that it is ready to tighten policy, which is highly improbable.<\/p>\n<p>&quot;I think it&#x27;s reflective of economic conditions, which is why other financial assets, like equities, aren&#x27;t taking it too badly,&quot; said Jim Caron, head of global macro strategy at Morgan Stanley Investment Management. <\/p>\n<p>&quot;The thing is you ain&#x27;t seen nothing yet,&quot; he said. &quot;That&#x27;s with a $600 stimulus check. What about with a $1,400 stimulus check in hand?&quot;<\/p>\n<h2>Improvement in the data<\/h2>\n<p>The Treasury market has been pricing in a more aggressive fiscal stimulus program from the Biden administration than many analysts had initially expected. <\/p>\n<p>The proposed $1.9 trillion package winding its way through Congress may not be reduced by much. The package includes a $1,400 payment to individuals, on top of the $600 they received in early January.<\/p>\n<p>Aside from the jobs report, the streak of recent data has shown improvement. <\/p>\n<p>January retail sales, reported Wednesday, rose 5.3%, versus forecasts of 1.2% and following a decline in December.<\/p>\n<p>The producer price index also rose sharply, up 1.3%, the most since 2009 in January as the cost of goods and services jumped. That suggests inflation is beginning to rise for manufacturers and can be a forewarning for higher consumer prices.<\/p>\n<p>JPMorgan economists estimate the rise in the producer price index translates to higher forecast of a 1.7% increase in year-over-year personal consumption expenditures, the Fed&#x27;s preferred inflation measure. <\/p>\n<p>The so-called PCE measures the changes in the cost of goods and services purchased by consumers.<\/p>\n<p>&quot;If this forecast for core PCE inflation is realized, it would be the firmest monthly increase since January 2007 while keeping the year-ago core PCE rate below the FOMC&#x27;s 2% inflation target,&quot; the JPMorgan economists wrote, referring to the Federal Open Market Committee.<\/p>\n<p>Even with the better data, the 10-year yield on Wednesday traded at about 1.29% after the early morning move to highs. Strategists said buyers were drawn in at around 1.30%, and the 10-year move may now slow or consolidate before another step up.<\/p>\n<p>The strong data did cause economists to raise their views on growth. <\/p>\n<p>Goldman Sachs economists upped their tracking estimate for first quarter gross domestic product growth to 6% from 5%, and Morgan Stanley economists raised their tracking forecast to 7.5%.<\/p>\n<p><svg width=\"20\" height=\"20\" viewBox=\"0 0 20 20\" fill=\"#002F6C\" aria-labelledby=\"title desc\" role=\"img\" focusable=\"false\" data-analytic-id=\"expand-icon\" class=\"InlineImage-background\"><title>Zoom In Icon<\/title><desc>Arrows pointing outwards<\/desc><circle cx=\"10\" cy=\"10\" r=\"10\" fill=\"white\" stroke=\"#002F6C\"><\/circle><\/path><\/svg><\/p>\n<p>&quot;Stimulus checks are coming, jobs are coming back. We think this is all going to happen as Covid numbers start to fall,&quot; said Caron of Morgan Stanley. <\/p>\n<p>&quot;We&#x27;re still going to get that $1,400 check,&quot; he said. &quot;Plus, there&#x27;s pent-up demand. The party&#x27;s just getting started.&quot;<\/p>\n<h2>Market prices in more inflation<\/h2>\n<p>The jumpstart to the economy has some investors worried that another big stimulus package will be igniting inflation and leave the U.S. struggling under a mountain of debt. <\/p>\n<p>But Caron does not think the market is responding to that, and the stimulus is a jolt needed to fill the output gap created when the economy fell off a cliff last spring. He also does not expect inflation to be a problem.<\/p>\n<p>The market, however, is beginning to price in more inflation. The 5-year breakeven, a market-based inflation instrument, was reflecting the view Wednesday that consumer inflation will average 2.37% over the next five years.<\/p>\n<p>&quot;You can take your pick whether it&#x27;s [the yield] going up with the stimulus or the economy and now the stimulus is actually impacting the economy. We&#x27;ve got stimulus already done which is making people spend, and stimulus to come which will spur more spending,&quot; said Michael Schumacher, head of rate strategy at\u00a0Wells Fargo\u00a0Securities. &quot;Inflation has been a talking point for the last few weeks.&quot;<\/p>\n<p>Economists expect inflation to perk up in the spring, along with higher prices from pent-up demand. However, they don&#x27;t expect the increase to be sharp enough for the Fed to engage on policy.<\/p>\n<p>Ed Hyman, chairman of Evercore ISI, said on Wednesday that 2022 growth looks stronger and above trend, due to stimulus. <\/p>\n<p>He said he was now expecting 3% growth in 2022, after 7.8% growth in 2021. However, Hyman&#x27;s view of inflation is still fairly tame. &quot;The core PCE deflator is likely to increase 2.25% y\/y in both 2021 and 2022, elevated but not significantly,&quot; he wrote.<\/p>\n<p>Hyman expects the 10-year yield to reach 2% this year and 2.5% next year.<\/p>\n<p>&quot;Probably the most important point here is that we&#x27;re in the early stages of a new expansion that&#x27;s likely to last at least through 2025,&quot; he wrote in a note.<\/p>\n<p>Strategists say rates should not rise too much with the Fed&#x27;s low rate policy and its bond buying program.<\/p>\n<p>The Fed Wednesday reaffirmed its concerns about the economy and its plans to stay on hold for the foreseeable future, in the minutes from its last meeting.<\/p>\n<p>&quot;The December spending legislation assured the economy of more fiscal support, as did the incoming Biden administration&#x27;s release of its economic recovery proposals, which brightened the broader discussion of the outlook in the minutes, but Chair [Jerome] Powell&#x27;s press conference made clear the economy is not out of the woods yet,&quot; said Bob Miller, head of Americas fundamental fixed income at BlackRock.<\/p>\n<p>&quot;And subsequent comments from other FOMC meeting participants reflect that now unified communications; essentially that &#x27;it&#x27;s too soon to talk about tapering&#x27; the asset purchases,&quot; Miller said.<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/02\/17\/interest-rates-will-continue-to-rise-but-dont-blame-inflation-economists-say.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Interest rates are rising because of expectations<\/p>\n","protected":false},"author":3,"featured_media":113273,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23054],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say - Pre Coin News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say - Pre Coin News\" \/>\n<meta property=\"og:description\" content=\"Interest rates are rising because of expectations\" \/>\n<meta property=\"og:url\" content=\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/\" \/>\n<meta property=\"og:site_name\" content=\"Pre Coin News\" \/>\n<meta property=\"article:published_time\" content=\"2021-02-17T23:49:16+00:00\" \/>\n<meta name=\"author\" content=\"mediabest\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/precoinnews.com\/wp-content\/uploads\/2021\/02\/cfntalkfoto106816499-16091603652020-12-26t132558z_411241287_rc21vk9ll7bn_rtrmadp_0_usa-holidayshopping.jpeg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"mediabest\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/\",\"url\":\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/\",\"name\":\"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say - Pre Coin News\",\"isPartOf\":{\"@id\":\"https:\/\/precoinnews.com\/#website\"},\"datePublished\":\"2021-02-17T23:49:16+00:00\",\"dateModified\":\"2021-02-17T23:49:16+00:00\",\"author\":{\"@id\":\"https:\/\/precoinnews.com\/#\/schema\/person\/ad0e9920e03d3b41c7ad02a18375d76a\"},\"breadcrumb\":{\"@id\":\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/precoinnews.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Markets\",\"item\":\"https:\/\/precoinnews.com\/category\/markets\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/precoinnews.com\/#website\",\"url\":\"https:\/\/precoinnews.com\/\",\"name\":\"Pre Coin News\",\"description\":\"precoinnews.com\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/precoinnews.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/precoinnews.com\/#\/schema\/person\/ad0e9920e03d3b41c7ad02a18375d76a\",\"name\":\"mediabest\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/precoinnews.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/f5f13cb3b94fc348d515c0951f6ca073?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/f5f13cb3b94fc348d515c0951f6ca073?s=96&d=mm&r=g\",\"caption\":\"mediabest\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say - Pre Coin News","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/","og_locale":"en_US","og_type":"article","og_title":"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say - Pre Coin News","og_description":"Interest rates are rising because of expectations","og_url":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/","og_site_name":"Pre Coin News","article_published_time":"2021-02-17T23:49:16+00:00","author":"mediabest","twitter_card":"summary_large_image","twitter_image":"https:\/\/precoinnews.com\/wp-content\/uploads\/2021\/02\/cfntalkfoto106816499-16091603652020-12-26t132558z_411241287_rc21vk9ll7bn_rtrmadp_0_usa-holidayshopping.jpeg","twitter_misc":{"Written by":"mediabest","Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/","url":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/","name":"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say - Pre Coin News","isPartOf":{"@id":"https:\/\/precoinnews.com\/#website"},"datePublished":"2021-02-17T23:49:16+00:00","dateModified":"2021-02-17T23:49:16+00:00","author":{"@id":"https:\/\/precoinnews.com\/#\/schema\/person\/ad0e9920e03d3b41c7ad02a18375d76a"},"breadcrumb":{"@id":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/precoinnews.com\/markets\/interest-rates-will-continue-to-rise-but-dont-blame-it-all-on-inflation-economists-say\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/precoinnews.com\/"},{"@type":"ListItem","position":2,"name":"Markets","item":"https:\/\/precoinnews.com\/category\/markets\/"},{"@type":"ListItem","position":3,"name":"Interest rates will continue to rise, but don\u2019t blame it all on inflation, economists say"}]},{"@type":"WebSite","@id":"https:\/\/precoinnews.com\/#website","url":"https:\/\/precoinnews.com\/","name":"Pre Coin News","description":"precoinnews.com","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/precoinnews.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/precoinnews.com\/#\/schema\/person\/ad0e9920e03d3b41c7ad02a18375d76a","name":"mediabest","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/precoinnews.com\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/f5f13cb3b94fc348d515c0951f6ca073?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/f5f13cb3b94fc348d515c0951f6ca073?s=96&d=mm&r=g","caption":"mediabest"}}]}},"_links":{"self":[{"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/posts\/113274"}],"collection":[{"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/comments?post=113274"}],"version-history":[{"count":0,"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/posts\/113274\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/media\/113273"}],"wp:attachment":[{"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/media?parent=113274"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/categories?post=113274"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/precoinnews.com\/wp-json\/wp\/v2\/tags?post=113274"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}