Getting back to normal probably won’t happen. Too much of our economy now depends on very abnormal interest rates. As real rates go up, businesses, households, and the federal government will be unable to refinance. They will go broke, default, or, in the case of the feds, print more money.
In today’s Money Morning, I’ll look at a huge signal from late last week and why it means things could get nasty in the short term. However, understanding the possible reaction to this worsening situation could actually be a big opportunity in a very specific industry.
US inflation came in a tad higher than expected this week. Which absolutely hammered markets in the US. Europe is in for a miserable winter of inflation too. And Australia is far from immune.
The Fed is expected to raise its key rate by 75 basis points (0.75%) at its meeting next week, putting more pressure on debtors. Some people are urging the Fed to go easy, fearing — correctly — that they might drive the economy into a deeper recession.
There’s an expectation that the government will come to the rescue should the markets tank heavily because of these coordinated rate rises by the central banks. But what if it’s different this time around?
ASX closes 0.2% higher on Thursday following big drops on Wednesday. Myer reports profit growth for FY22 as Tyro Payments appoints new CEO.
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