In the last few weeks, global stock and bond markets have been rallying after a period of sharp falls. The reason is clear.
The US Federal Reserve monetary policy chiefs have been talking down their plan of starting to hike interest rates this year. At their last meeting in September, the statement said that the planned increase in the Fed’s interest rates, which sets the floor for the cost of borrowing to spend or invest, may be postponed because the weakening situation in the global economy, particularly in the so-called emerging economies.
The slowdown in global growth has been well-documented in this blog in several posts. Now the expectation that the US Fed will not move ‘prematurely’ to drive up the cost of debt servicing in the rest of the world has helped to inspire a rally in the value of financial assets – for the moment.
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