Blog: Yet another "new normal" for inflation and interest rates?

The stock and bond markets have spoken. We are now in a persistent environment of 4% to 5% inflation and corresponding interest rates. While the phrase “new normal” has roots back to World War I and has been used by people as disparate as market guru, Mohammed El-Erian and science fiction writer, Robert Heinlein, the phrase is so evocative that the time has come to use it again.

The stock market rallied and bond yields rose following the Fed’s announcement that it will skip a rate hike this month. The Fed also has said that the markets shouldn’t expect any rate cuts until at least 2024. No matter. Growth is assured. The markets have grown used to higher inflation and interest rates and expect the status quo to continue.