The Federal Reserve continues to delay raising interest rates. The United States central bank has only had one rate hike in the last decade. This trend may have many perma-bears thinking that the Fed will keep rates low in perpetuity. It’s possible, but with the tsunami of inflation heading our way, Janet Yellen and Co. may have no other choice but to hike rates.
According to former Federal Reserve Chair Alan Greenspan, the central bank will start to raise rates soon and that the interest rates will surprise investors across the country.
Speaking in an interview with Bloomberg, Greenspan conceded that the U.S. can’t maintain these near-record low interst rates for much longer. He noted that rates have to finally move up, adding that they may “surprise us with the degree of rapidity which may occur.”
Greenspan explained that the U.S. economy may be traveling to a road of stagflation, an economic state of stagnant growth and rising inflation.
“The very early stages are becoming evident,” Greenspan stated.
The former Fed Chair was also quite pessimistic on the eurozone. He noted that the eurozone has very little chance of surviving present conditions and in its current incarnation, referring to the 19-nation bloc as “unworkable.”
“It will break down, as indeed it is showing signs of in many different areas,” he said.
Over the last couple of years, Greenspan has become more candid and has even reverted back to some of his original stances (SEE: Does Alan Greenspan advocate a return to the gold standard? and Alan Greenspan attacks negative interest rates, says it will ‘warp’ savings and investment).
Perhaps it’s his old age. Maybe he has realized that Keynesian monetary policy is evil and that he has to repent before he perishes. Who knows?
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