Blog

What is the future of rates?

May 1st, 2019

This week’s jobs report could offer insight about the future of interest rates.

 

Much has been made of the fact that interest rates are lower this year than those "high paid" market analysts predicted. These lower rates have contributed to a rebound in the stock market during the first third of the year. Lower rates have also contributed to a rebound in the housing markets. We have witnessed higher oil and gas prices this year as well. This has led some to speculate that the economy might be self-correcting. 

What do we mean by that? The same prognosticators who said rates would rise were also predicting an economic slowdown this year. And the most recent overall measures of the economy have shown that the economy indeed is slowing down. But we have also speculated that the boost which comes from lower interest rates could also cause the economy to rebound a bit, or at least not slow down as much as predicted. If this hypothetical comes to fruition, it is quite possible that interest rates have already reached their low for the year. 

We have already seen a small rise in rates. Might interest rates start rising from here? We don't know, but the jobs report coming this week might give us a major hint. A stronger than expected showing would strengthen the theory that rates are contributing to an economic rebound and we could see rates start rising from here. A moderate or weak report could keep rates at their present welcome lows.