We begin this new blog with a look at the low interest rate environment, presenting several views that point to the likelihood short term interest rates will remain low for a long time into the future.

Howard Lutnick, CEO of Cantor Fitzgerald, predicts  that “ interest rates are going to stay effectively nil on the short end for at least five years

[emphasis added].”  As CEO of Cantor Fitzgerald, which manages the sale and distribution of US Treasury securities, his vantage point makes his thoughts especially relevant.  He spoke March 12, 2013 at an event entitled Fear And Opportunity In The Credit Markets, sponsored by, among others, Vanderbilt’s Owen Graduate School of Management and the Nashville Society of Financial Analysts. His thoughts can be viewed on YouTube; he begins speaking at 5:20 into the video: http://www.youtube.com/watch?v=hHKydW2y65g

Fed Minutes Show Support to Stop Easing.  The unconventional bond buying program of the Federal Reserve, to the tune of $85 billion per month, works to lower interest rates. But, the policy has its doubters among members of the Federal Open Market Committee.  Minutes of the March 19-20 meeting indicate that some members “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and stop them by year-end.” However, this meeting occurred two weeks before March’s payroll report was released on April 5 showing payrolls grew by only 88,000.  The economy needs to add about 200,000 jobs per month to sustain a satisfactory growth rate. So, even though support exists for slowing asset purchases, job growth has not sustained sufficient momentum to cut back on the bond buying program.  http://www.bloomberg.com/news/2013-04-10/treasuries-decline-a-third-day-before-10-year-sale-fed-minutes.html


Fed’s Yellen Backs Policy to Keep Rates Lower for Longer– Federal Reserve Vice Chairwoman Janet Yellen, who many see as Chairman Bernanke’s successor, says she sees nothing in credit markets that justifies raising interest rates and that she supports keeping the central bank’s key rate at a historic low.  “Policymakers need to weigh the possibility that by raising interest rates they may create another set of threats to financial stability”, Yellen said.  The Federal Open Market committee previously pledged to keep short term rates near zero so long as the unemployment rate remains above 6.5 percent and the forecast for inflation does not exceed 2.5 percent over one to two years.  http://www.bloomberg.com/news/2013-04-16/yellen-backs-lower-for-longer-rate-policy-while-seeing-risks.html

Six years of low interest rates in search of some growth.  The Economist notes that “never in recent economic history have interest rates been so low for so many for so long.”  It further notes “when rates were first cut to their current levels in 2008-2009, it looked like a temporary expedient; now it looks like normality.”  In conclusion to a rather long article, it concludes “it seems highly unlikely that any of the big rich-world central banks will tighten monetary policy in the near future.  The risk of sending the economy back into recession is too great.” http://www.economist.com/news/briefing/21575773-central-banks-have-cushioned-developed-worlds-economy-difficult-period-they-have-yet  (registration may be required)

We hope you enjoy reading these articles along with us and that you find them informative.  Please forward this to your friends and family.

J. Mark Nickell & Co.



Disclosure – The articles mentioned in Mid Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security.  J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.