The Federal Reserve has finally moved on interest rates and the time is approaching where the Bank of England may soon follow. Seven years after the financial crisis the psychological scars remain but much of the financial damage has been repaired. In the US, banks have been restored to robust health, the stock market is near its peak and the focal point of the crisis, the US housing market is well on the road to recovery.




With interest rates still close to zero seven years after the crisis, economies should be running pell-mell. Yet developed economies are struggling to sustain growth much above 2% and inflation is very adjacent to zero. Is this really as good as it gets? Neil Woodford recently blogged that he is ‘more concerned about the threat of deflation than inflation’ https://woodfordfunds.com/ornithology-monetary-policy/, we too share these concerns. Tellingly, since the credit crisis, many of the central banks which have lifted interest rates have subsequently been forced to back track.

 

Something has fundamentally changed and with each passing year, evidence mounts that the financial crisis represents a watershed moment for the global economy. Perhaps this really is as good as it gets.