The march higher in US interest rates will continue

Yesterday, after the inflation report came out, I wrote that as inflation expectations increase, the interest rates investors will accept will climb slowly. Equity markets won't throw a fit at 2.85% interest rates as they did just recently. Instead though, it could be smooth sailing until 10-year interest rates hit 3.00%. And then we see more market volatility. But once that level settles in, the acceptable rate might climb to 3.25%. And we will repeat the process all over again.

This is how late-cycle interest rate hike regimes work. But at some point, there will be a negative impact on credit and that will feed through into the real economy. That's the view I presented last night when I spoke to Peter Armstrong on CBC's on the Money program. Below is the video clip. But let me expand ...


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