What will the U.S. Central Bank do next? The answer to that question used to be easy. For most of my career, we would look at U.S. economic conditions. That’s no longer the case.
Just as globalization permeates daily life, it also affects our national economy. The Federal Reserve’s actions don’t exist in a vacuum. Every decision has a ripple effect of repercussions that span the global economy. Consider this: The Fed would, if given the option, prefer to see higher rates–and setting higher rates is easily accomplished. What’s stopping them is the threat of potential market disruptions. Tightening rates ahead of market expectations could affect China and push it toward having a free-floating currency to protect its own economy.
In the video below, I discuss the influence of the Central Bank and how it creates unofficial coordinated policy worldwide.
Generally, as interest rates rise, bond values will decline. The opposite is true when interest rates decline.
The opinions expressed are those of Dave MacEwen and are no guarantee of the future performance of any American Century Investments portfolio.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.