The Oregon Biz Report - Business News from Oregon

Read about accutane journal moderate acne here

Forecast: Low interest rates through 2011

June 25, 2010

New Interest Rate Forecast: Staying Low through 2011
By Bill Conerly,
Conerly Consulting
, Businomics,
I now forecast that interest rates will continue to be at their current low levels through the end of 2011.

The economy has substantial slack.  The level of our GDP is still 1.1 percentage point beneath our pre-recession peak level of output.  In the nine quarters since the peak, we should have had about seven percentage points of growth due to normal population and productivity gains.  So we are roughly eight percentage points below our potential.  Some estimate the gap at only six percentage points, but it’s still significant.

Even the most optimistic economists in the Wall Street Journal survey expect only 4.4 percent GDP growth this year, and 4.7 percent in 2011.  If the optimists are right, we’ll still be three to five percentage points beneath our potential.  Unemployment will not be much below seven percent.  And if, instead, the pessimists are right, then things will be even worse.

Although I am asked about inflation regularly, there is no evidence that financial markets expect an acceleration of inflation.  The spread between regular treasury bonds and inflation-protected bonds (TIPS) is less than two percentage points, about equal to today’s inflation rate.  Economists are generally predicting that inflation will remain muted.

In this extended period of a slack economy, I do not believe the Federal Reserve will raise interest rates, nor do I believe that market forces will significantly increase bond interest rates.

  
Print This Post Print This Post    Email This Post Email This Post

Discuss this article

no comments yet

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Articles

Press Releases



Top Business News

 

Top Women's News

 

Top Natural Resource News

 

Top Faith News

 

Copyright © 2016, OregonReport. All Rights Reserved. | Terms of Use - Copyright - Legal Policy | Contact Oregon Report

Stay Tuned...

Stay up to date with the latest political news and commentary from Oregon Business Report through daily email updates:

Delivered by FeedBurner

Prefer another subscription option? Subscribe to our RSS Feed, become a fan on Facebook, or follow us on Twitter.

RSS Twitter Facebook

No Thanks (close this box)